AltX hedge fund platform forms distribution partnership with Northern Trust
Hedge fund market intelligence platform AltX has evolved. The announcement late last month of a major distribution deal with the Chicago-based custodian and wealth manager Northern Trust is expected to be the first of several partnerships with distributors, which are warming to the idea of sharing fund management manager data with their clients. This reflects an evolution in the sales strategy of the business, which was founded in 2012 by Sam Hocking, formerly head of prime brokerage at BNP Paribas.
Under a revenue-sharing agreement, Northern Trust will distribute the structured and unstructured hedge fund data gathered by AltX from 20,000 fund documents, 70,000 hedge fund personnel profiles, and 50,000 Form ADV filings. The bank is making the on-line data and analytics service available to the institutional investors for which it safekeeps and services assets, with the aim of helping them improve oversight and understanding of their investments.
Northern Trust clients will upload their existing portfolios into AltX and receive not only data about the performance of existing investments, but performance relative to comparable strategies and the hedge fund market as a whole, plus news alerts not only on the managers they use but also managers and funds of interest to them. “We are giving them context on how they are performing,” explains Matt Jose, head of sales at AltX, and a former colleague of Sam Hocking at Bank of America and BNP Paribas. “They can also monitor their managers, because our news feeds tell them if a portfolio manager leaves, or they launch a new fund, or their AuM goes down.”
For AltX, the benefit is obvious. “Northern Trust is interested in innovative technologies they can share with their clients,” says Jose. “The bank has 1,200 asset owner clients. This is instrumental in getting AltX in front of a larger audience of institutional clients. It is a great way for us to reach a large number of high quality clients invested in hedge funds, and help them monitor their existing investments in a new way, and find new managers as well.”
Other agreements may prove harder and slower to finalise, but Jose says the pipeline is full. “Northern Trust is the first of a series of distribution deals,” he says. “We have got several that will be announced in the coming weeks and months.”
Between them, they represent a deft adaptation by AltX to market feedback. “Our original concept was to use a combination of behavioural science and big data to match investors to funds,” explains Jose. “The feedback from potential customers was that the data aspect was more important. People saw the value of adding behavioural information to the data set, but only as part of their decision-making process. Therefore, rather than put overt focus on the process of collecting the behavioural data from clients, we have now integrated observed behavioural analytics (OBA) as another data set to assist with our users' decision-making.”
In response to client demand for additional data, AltX stepped up its data collection and analysis efforts, not only sourcing more data, but improving its quality and timeliness as well. That gave rise to the concept of offering a portfolio monitoring and benchmarking service to investors, which was a large part of the attraction to Northern Trust. AltX also worked on the user-friendliness of what remains a large database of five million data points and a sophisticated set of tools for turning data into actionable information.
“We spent a lot of time on the user experience, to make it more intuitive and easier to use,” adds Jose. This has improved the appeal of AltX to all sorts of firms selling to fund managers – prime brokers, equity sales-traders, custodians, fund administrators, IT vendors, and audit firms – that need an up-to-date picture of the business of existing and potential clients. Hedge fund managers also find AltX useful to compare performance, fees and staff turnover with their competitors when pitching for an institutional mandate.
An easier-to-use interface makes it easier for the AltX service to appeal to the wirehouses and RIAs that sell investment products to retail investors as well. “For the large retail networks, AltX is invaluable to the people that pick the funds to sell,” says Jose. “They can pre-load existing investments into the system, and compare their performance against lists of comparable funds and get a real-time news flow about both. We are developing a different version of the platform for smaller retail advisers that have allocations to hedge funds that we hope to roll out within the next year.”
For now, AltX confronts limited competition to supply data of such range and comprehensiveness. “There are databases which cut into parts of what we are doing, but nobody is combining data, people and news in the same way that we are,” says Jose. “It is a much more difficult challenge to make sense of all the structured and unstructured data out there. We have successfully met that challenge, and it is a strong competitive advantage for us.”
The firm sees this comprehensive view of the hedge fund industry as its key differentiator. “Our ability to give users a 360 degree view of the hedge fund marketplace by combining financial, regulatory, public, behavioural and third party data with the users' own data is unique,” adds Jose. “We not only put all that information at our users' fingertips - what they want, when they need it, where they need it – but help them make sense of it through matching, search and analytics. By assessing and evaluating different data sets in one place, through human and machine analysis, we can help our users better examine and understand the correlations between disparate market measures. We do not think that is available elsewhere.”
In fact, one of the advantages of the distribution deals that AltX now strikes is the opportunity to augment the database with proprietary information from investors and fund managers. “We already have deeper data than any competitor, and that gets us access to clients, who can deepen our data sources still further,” explains Jose.
He adds that most managers accept that more transparency is now essential and see it not just as a way of attracting investors, but of managing their own businesses more effectively. “Most of the larger groups we are working with have expressed the view that the system is more useful to them if we can incorporate their data,” says Jose. “We absorb their data, and then push it back to them, enriched by all of our other data.”
Yet, ironically, AltX is not really a data sale at all, but a FinTech proposition. “We are competing for the technology budget,” argues Jose. “Although some clients do want specific data incorporated into their implementations, we are selling software as a service, not a data vendor.” Of the 40 people working at AltX, all but a handful are technologists.
For Jose, as head of sales, a longer term goal is to sell that software as a service to more investors and distributors in Europe as well as the United States. “By shifting our strategy, we have expanded our market,” he says. “Our data already covers a number of funds based in the United Kingdom, continental Europe and Asia. There is less information publicly available than there is in the United States, but we have a foundation on which to build. The long term opportunity for us is to create a complete customer analytics platform across multiple countries as well as multiple asset classes.”