AltX platform to move beyond hedge funds into other asset classes
Imatchative’s AltX platform, an online service that facilitates introductions between institutional investors and hedge funds is likely to move into other asset classes including traditional mutual funds, private equity and real-estate in due course.
AltX aims to pair hedge funds with prospective clients using complex algorithms that comb through investors and hedge funds’ risk profiles and portfolio analytics and identifies their compatibility based on their shared criteria, in a manner not too dissimilar to Eharmony, the dating website. Investors pay to subscribe to AltX’s hedge fund analytics. Managers pay a small subscription fee and an additional fee if they receive a capital allocation.
“Hedge funds are only just the beginning. Once we gain traction in that asset class, we intend to diversify into traditional long only funds, private equity and real estate. Take a look at Jeff Bezos of Amazon. Amazon used to provide books, and now its business model is enormously diversified,” said Sam Hocking, chief executive officer and co-founder at Imatchative in San Francisco, and former head of prime brokerage sales at Bank of America and BNP Paribas.
Having launched earlier this summer, the firm already has 100 subscribers. “We are creating a database of hedge funds using information from third party distributors, data providers, our own proprietary information and regulatory filing Form ADV with the Securities and Exchange Commission (SEC) and long positions filed with the SEC. We have 16,000 funds on our database, and we intend to comb through the UK Financial Conduct Authority’s (FCA) hedge fund database too,” said Hocking.
The service will also bring about transparency to investors and could facilitate cash-savings. “The service does speed up the hedge fund investment process, and could help investors cut costs. It improves transparency in the hedge fund industry, as most managers have been welcoming to the idea of supplying the necessary data. While the service will not replace an entire investment team at an allocator, it could replace a single person, and help reduce overheads,” commented Hocking. It could also reduce costs by enabling investors and managers to cancel their subscriptions to certain industry databases.
The capital introductions teams at prime brokers, many of whom are facing added scrutiny courtesy of the rules on marketing non-EU funds to EU investors because of the Alternative Investment Fund Managers Directive, not to mention broader challenges including cost-cutting at the prime brokers themselves, were initially nervous about AltX, but this fear appears to have subsided. “I originally thought capital introductions would be impacted by AltX but they are now recognising it can complement their own businesses. They recognise they can use the data and work with us too,” said Hocking.