Family offices and institutional investors are challenged by tracking how well multi-asset portfolios, and illiquid ones in particular, are behaving. A firm that operates in this space sets out its recent moves, and future direction.

Monitoring investment performance, while simultaneously mitigating overexposure within a multi-asset class portfolio, represents one of limited partnerships’ greatest challenges. This same challenge creates an opportunity for technology specialists in the field, according to Boston-headquartered Dynamo Software.

Early in November the firm issued a White Paper, entitled The State of Technology For Multi-Asset Class Portfolio Tracking, which concluded that family offices and institutional investors lacked a clear-cut technology solution for handling portfolios made up of a variety of asset types.

Some 72 per cent of respondents to its survey said they had difficulty, or experienced occasional trouble, tracking multi-asset class portfolios. Also, 84 per cent said reporting was, at times, a concern, and two thirds said that they were uncomfortable with the amount of time spent generating investment performance reporting.

Given this consistent feedback of difficulties faced in successfully leveraging technology for multi-asset class investment portfolio management, effectively addressing the prevalent technological obstacles is a priority for institutional investors and family offices.

Dynamo Software argued that there are, for example, drawbacks to using in-house systems and platforms that have been customized to address only a segment of the financial services industry, suggesting there are winnings to be gained from filling the gaps in tracking multiple asset classes in a comprehensive data aggregation and reporting system.

As wealth managers seek more illiquid and varied investments to obtain yield in a low- or even negative interest rate environment, the need for fast, accurate data on such assets is arguably more urgent than ever.

The report, and the scope of Dynamo Software’s current product offerings, shows how significantly this firm, founded in 1998 at the height of the dotcom boom, has evolved. Dynamo Software started as a private equity-focused business spun out from a leading technologist of Summit Partners, and has moved into other segments in the subsequent years, such as hedge funds, venture capital and real estate,  and continues to be entirely focused on alternative assets and allocators. Challenges with alternative investments can be relatively illiquid, creating valuation challenges that can be out of reach for some technology providers.

The firm’s Dynamo™ software platform caters to a variety of client needs and areas; its functionality addresses challenges within the investment operations of asset allocators such as family offices and intuitional investors, to their general partners including private equity, hedge funds, real estate, fund of funds and prime brokerage.

Dynamo’s offerings are in “modules”; rather than a one-size-fits all product, clients can pick and choose from feature sets to improve specific areas of their investment operations. A few weeks ago, the firm announced the v7.0 release of the Dynamo™ platform, upgraded to be particularly useful for family offices and limited partners. Updates to the platform include a commercial web API which optimizes integration with external investment research data providers, reporting packages that align with ILPA requirements, and a secure single sign-on feature.

One selling point, so argues Jason Doring, marketing content manager at the firm, is that the Dynamo™ offerings can be configured rather than customized for clients, empowering its users to apply desired changes rather than rely on their software vendor. “By standardizing the technology and applying changes through configuration, updates to the application are seamlessly rolled out without breaking the application due to customized coding," he told this publication recently.

His colleague, Krassen Draganov, the firm's CEO, added: “As a privately owned and completely independent fintech company, we have the opportunity to focus on our customers and conduct improvements in software rather than purely focus on bottom line growth."

“In an industry that is seeing consolidation where products tend to get suddenly but into maintenance mode, we see this as a substantial opportunity for us to provide the best products,” Draganov continued. By contrast, this sort of abrupt closure of a product doesn’t happen at Dynamo Software, he said.

Chunky, clunky
The present financial services sector is still seeing examples of clunky technology used over a decade ago, and have been historically reticent to adopt newer technologies to optimize investment operations, said Doring. “There are still organizations entirely relying on Excel,” he said.

As a result of the lack of more human-error resistant ways to track investments and performance, it is also difficult for wealth managers to convince regulators that they are complying with standards such as investment suitability, Doring said.

Dynamo Software has been expanding. The company opened a dedicated UK sales and client service office in London in 2015, and an office for the Asia-Pacific market in December 2016; the company now has more than 90 staff globally.

While the privately-held firm doesn't disclose financial results, the company did say that it has been profitable since inception and has attained more than 400 clients through wholly organic growth, with consistent year-over-year growth over 20 per cent for the last five years.

“It is our corporate goal to be in a position where we offer unparalleled support through a premium product.” Draganov said.

Clients cover a range of organizations, such as LaSalle Investment Management, The Riverside Company, the University of Oregon, Rockpoint Group; Fort Washington Investment Advisors; Shamrock Capital Advisors, and Deerfield Management Company.

Future
So what lies ahead? The Dynamo 7.0 platform will be updated in the upcoming year with a new graphical user interface that "further optimizes navigation within the platform while building upon improvements to the new front end of the application" Doring said. This update will also incorporate a global search feature that will enable users to find relevant terms in uploaded documents and correspondence, as well as enhanced hierarchical lookups, conditional formatting, grid totals, and flexible impromptu reporting.

The firm is also extending its offering to fund administrators, with functionality designed to facilitate stronger communication and productivity between the administrators, the alternative investment firms they serve, and ultimately their clients’ clients (investors) through the investor portal.