By: Evan Thorpe, Principal at SixThirty
It’s a daily topic of conversation in institutional FinTech: the multi-asset portfolio as the basis for the future of wealth. From our founders, to our investment team, to our corporate partner LPs and their networks, SixThirty Ventures has noted the major shift occurring as global wealth is transferred generationally and how it has highlighted the gaps in market structure. At the heart of this dialogue: the pressing need for next-generation market infrastructure urgently needed to make the transition to portfolios that embrace private assets and alternatives an orderly one for clients and a sustainable one for institutions.
Multi-asset portfolios are even more complex today as more types of private assets enter into more portfolios and in greater amounts. Alternatives reached $25tn in AUM last year and are estimated to reach $59tn by 20331. But despite this massive opportunity, all is not rosy in the space.
$84.4tn in assets are being passed from the silent generation and baby boomers to their descendants and beneficiaries. Billionaires are expected to transfer an estimated $5.2tn in wealth to their children over the next two decades. OCIOs can take on more business at lower cost if they adopt technology that can support this complexity with less manual labor, thereby cutting time spent on managing existing client portfolios and freeing up time to take on new client portfolios at lower marginal time spend, and therefore without adding additional headcount to support them.
Institutions are paralyzed by their own considerations. They wish to capitalize on the opportunity to deliver leverage to multi-asset portfolio management but face operational constraints which give them pause as they are not sure if they can pursue it profitably.
Accounting for the different liquidity profiles and conditions of these varying asset classes makes portfolio management, execution, and cash & liquidity management an exercise in navigating complexity. If this was not already hard enough, different but intricately related client mandates and sub-mandates overlap thereby making BAU account management a compounding operational challenge.
OCIOs, multi-family offices, single family offices, and asset managers that advise their clients are compensated to bring clarity to their clients’ portfolios, protect their assets, and grow their wealth; navigating this increasing complexity as they go. Today’s status quo of manually-linked data and processes limits the amount of business institutions can take on, reduces the number of clients they can serve, and caps their AUM.
The strategic opportunity for institutions to grow in this space is a question of packaging service, advice, data and technology into a platform that is architected to help these institutions to manage this complexity more scalably so that they can unlock greater business without compromising their margins.
Liquidity terms and timelines, capital calls, asset restrictions, these intricate and sometimes arcane asset attributes should be ingested and tabulated so that AI and analytics can be applied. This way, these complex asset and portfolio attributes won’t get in the way of PMs making the right decisions in a timely fashion and taking on more clients won’t make portfolio management more costly.
Osyte’s platform enables OCIOs and multi-family offices to make this complex portfolio management and execution simpler, and below we’ll explore how.
An estimated 7,300 family office market represents as much as an estimated $54.7bn revenue opportunity to those that serve them. Companies are continuing to stay private longer. 87% of US companies with $100M or more in annual revenue are private. This cohort of asset owners/ investors and the service providers looking to partner with them want to capitalize on this opportunity, but should do so unprofitably or without thinking through the operational burden they will inherit.
The rub: a high bar for operational performance. What constitutes “the best portfolio” for a given client shifts on a day-to-day basis because the markets change, their needs change, and what constitutes ‘best,’ is a moving target. Financial institutions cannot wait for the world to slow down, they must develop the means to keep pace, so that their clients can outpace.
Why we believe Osyte can Change the Game:
The demand for multi-asset investment strategies alongside the demand for nuanced management of complex investment mandates have made it operationally very expensive to deliver on complexity and personalization. This has given asset managers, OCIOs, and family offices pause to consider which customers are above their line. In many cases, the firm may not be rewarded for serving clients below a certain hurdle. So could this line be lowered? Could latent economic value be unlocked by broadening the minimum viable AUM limit that makes serving additional client bases economically accretive? Osyte believes that it can, and we agree.
Osyte’s founders recognize that when investment managers today look to deliver true multi-asset portfolios, they will need to support greater complexity at both the level of the client mandate and at the level of that financial institution’s own operations. Osyte’s founders, Charles Anselm and Sellappa Gopalaswamy have created a platform that achieves both of these ends.
The Osyte platform helps bring order to chaos. It integrates with existing data ingestion inputs, portfolio management conventions, client custody accounts, and service providers, and brings all of their assets regardless of asset class into one place. By embracing portfolio and operational complexities natively, so that institutions can manage these portfolios scalably. Client mandates, whether family-specific or individual specific, across all accounts are displayed visibly, their overlapping underlying assets attributed clearly. PMs using the Osyte platform can use this improved visibility and mandate traceability to plan, manage, and execute as liquidity and market conditions shift.
The outcomes desired by these investors goes beyond optimized returns, diversity, risk management and exposure; the burden for investment outperformance is great. The other side of this coin is the burden felt by the financial institutions that serve them for organizational outperformance needed to deliver. Osyte is ushering in a major shift in organizational outperformance: helping the institutions they serve offer greater leverage to capitalize on shifts in asset management and wealth, scalably.
This is why we are excited to invest in Osyte. The team is uniquely qualified to address and solve this problem and by bringing them access to the SixThirty network and the expertise shared within it, we couldn’t be happier to partner with them as they execute on the journey ahead.
How SixThirty can Help
The SixThirty Ventures team has knowledge, experience and expertise in financial services and global markets technology. We know how these institutions operate, how they use technology to solve operational constraints and as a component that supports their strategic advantages. We deeply understand how they make decisions on how to manage change involved with adopting new technology and how to best collaborate with partners to achieve this.
SixThirty is backed by the very institutions looking to deliver better products and services and do so in a way that is more effective while also being more efficient.
Our conviction view is that if the Portfolio of the Future is multi-asset, then both market structure and market infrastructure must develop to support this new standard. Data & technology needed today are providing this infrastructure. The companies building and adopting this technology (whether in-house or externally) comprise the market structure.
At SixThirty we have invested in businesses that are transforming financial services. SixThirty’s portfolio includes managing unstructured data, tokenization, data tabulation & standardization, and Osyte represents the next layer of capability: multi-asset portfolio management and execution optimized for scale.
What questions are coming up next?
In asset management, wealth management, and capital markets, we believe that a platform approach (rather than point solutions) delivers the most value. The industry has extended beyond thinking of the ability to deliver personalization for the portfolio of one, but to weighing the revenue potential for delivering this, holistically. What is the benchmark for revenue potential? How will this equation develop as these institutions and their platforms are increasingly powered by engines that convert data to insights and from insights to decisions, actions, and allocations? SixThirty will be looking at further opportunities to extend this principle further: to private credit, asset tokenization, and outperformance attribution.
1 https://www.bain.com/insights/avoiding-wipeout-how-to-ride-the-wave-of-private-markets
