The hedge fund space has had a tumultuous time this year, as the underlying equities most of the strategies use have been negatively impacted by the global pandemic. However, Siepe is a software as a service (SaaS) company that has made hay by allowing emerging hedge funds to outsource a lot of their processes to it, saving money and most importantly making sure that the data fed into the front, middle and back offices is clean.
CEO of the firm, Michael Pusateri (pictured) told fundeye: “I want to present that data to a portfolio manager because it should go in to his/her investment making decision in the context as well. So data without context is just data but data with context is value.”
Mr Pusateri has a lot of experience in the hedge fund space including roles such as chief technology officer (CTO) for Carlson Capital and CTO as well co-chief operating officer for Highland Capital Management. It is this marriage of technology with investment decisions which has drawn in some top tier financial institutions to using the firm’s solutions, such as the ability to onboard new clients to the company’s cloud platform.
For some of its clients needs, Siepe uses Confluence’s expertise, especially in the back office reporting space. However, while some of the behemoths of the hedge fund industry, which Mr Pusateri describes as ‘franchises’, have struggled in the new normal, he has also seen some players emerge victorious, put simply, due to their decisions on which stocks to back and which to short.
It is the emerging hedge funds with a niche focus that he believes will do well and mentioned a fund that had a great year which concentrates on the food and health care sector for pets. A lot of these up and coming funds have spun out of the larger players so have talented managers but need help in the general running of the fund, be that from which data sets to use to make investment decisions all the thorough to back office reporting.
Siepe also counts among its clients some of the largest endowments and other institutional investors mainly in the US. Refreshingly, when asked about assets under management or under advisement which would be a more apt description, Mr Pusateri is reluctant to give a number. This is because if you count some substantial hedge funds and endowments among your client roster, it would be tempting to add their vast assets together and give a figure that would probably be in the hundreds of billions. He chooses not to do so.
Another point of note for Siepe’s business model is that while it counts hedge funds as well as potential investors in said funds as clients, the firm does not actively seek to introduce these parties which may be extremely lucrative. However, if asked by an endowment for a fund that might meet the clients’ needs, it may make an introduction but prefers to work looking for synergies between parties.
Another large client base of Siepe is fund administrators, this is where the use of the firm’s IT knowledge can really add value, especially as time to market is often a key requisite. “What we do for fund administrators is when they buy a new business, how quickly can we get them to onboard it. Our tool helps with them onboarding funds in the fund admin space to migrate between two different administrators. So if someone buys a big book of business from another provider, then they can onboard it quicker and our tool allows them to do it, in a fraction of the time,” said Mr Pusateri. He added that this function has seen a great deal of traction in the last 6-12 months and again mentioned Confluence as an important part that helps with the regulatory compliance side.
Given that many businesses require client facing meetings in order to function, Siepe has not been impacted by COVID compared to firms that may still use manual processes. On the contrary, the pandemic created opportunities for Siepe given its structure.
“it's created quite a bit of opportunity for us in the space. When things settle down, I think we'll see a huge uptake and people really switching or being more aggressive on the technology side,” said Mr Pusateri. Given the move away from manual processes in the general fund data space, perhaps this area is yet another example of where COVID simply sped up a transition that was already well under way.