AssetTech: An Emerging Pillar in FinTech

This article was originally published on Toolbox, found here.

Data has become the watchword in this frenzy of investment and innovation.

AssetTech is a growing and exciting component of the FinTech sector.  With over $120 trillion in assets under management (AUM), asset managers are looking for the right platforms to allow them to harness data for high returns and risk management. Join Romi Mahajan, CEO, KKM Group & Pulak Sinha, CEO, Pepper, in this article as they take a closer look at the innovations in managing assets.

Some sectors boast numbers so large that they go beyond imagination. Asset management is one such area. Estimates suggest that worldwide, $120 trillion is managed by professional asset managers, and the number is projected to reach 145.5 trillion by 2025.  This number exceeds the world’s yearly GDP and puts it in a rare category of industries that touch so much capital.

Of course, the financial services sector is a vast industry, with capital flows and transactions measurable in 18 digits. Investors, entrepreneurs, and institutions alike have recognized the importance of this sector in the larger economic picture. They have plowed a lot of resources and innovative capacity to make the industry more productive, secure, and accessible.

Data: The MVP in Asset Management

Data has become the watchword in this frenzy of investment and innovation. It has been understood as a great source of value, rivaling land, gold, and oil, each of which was the predominant source of value in different historical eras. That financial services and data go hand in hand is not surprising since the sector is very much defined by technology constructs and driven by information.

As data has emerged as a commodity of value, practitioners have made investments in various technologies to access, store, interpret, clean, secure, and use data for commercial ends.  Anyone who has spent even a minute studying the technology sector knows how data and data services dominate the industry and constitute the single most significant piece of the pie in an already enormous sector.

Where Is the Spotlight?

As with everything, the world is more complex than it might appear to the naked eye, and once one peels back the layers, the world of data is far fuzzier than it might appear in a typical headline. The vast asset management industry is an interesting case in point.

Asset management has not received the attention it deserves from data aficionados and technology companies despite its size and importance. Many asset management companies rely on dated technology to make decisions and manage their businesses. This is not a “throw under the bus” statement.  Instead, it is an indictment of the players in the space that have not made it easy and practical to modernize the technology stack in asset management. Because of this, we created the phrase “AssetTech” as a clarion call for the industry to think about this burgeoning space as a focal point for innovation.

The issues and problems in the space mirror the opportunities. At the outset, we’ll state our position: There are vast opportunities in asset management and, therefore, AssetTech.  Estimates of the $120 trillion AUM are that about $20 trillion are in “alternatives” or non-liquid assets. New asset classes emerge or are defined constantly. Of late, huge investments have flowed into Crypto, Real Estate, and even areas like Collectibles and rare items. Asset managers have to optimize return across asset classes and deals while complying with regulations and coping with markets that move as fast as data moves. They simultaneously look to maximize ROI while minimizing risk and use data flow to make decisions. Data silos, imperfect timing, antiquated systems, and the lack of a consistent and persistent data culture can understandably cause much anxiety.

A Platform for Success

Entrepreneurs from within the industry have worked to create solutions, but few have done so in a holistic manner. This is the classic trade-off between quick-to-market point solutions and comprehensive platforms. We believe that the platform approach is right and worth the extra time to develop, test, and incubate.

Great AssetTech must accommodate the complex data needs of asset management firms.  It must also allow the asset managers to quickly, securely, and comprehensively use data with “market-timing.”  Multiple dynamic data sources must be understood, acted upon, and ultimately connected to customer and partner engagement. AssetTech must span all aspects from Deal flow and initiation to reporting on the back-end. Thus, data platforms are needed and not just one-off point solutions.

Stepping Up to Step Forward

AssetTech is an important area for investment and innovation. As the aggregate industry AUM rises, investment options grow exponentially, and as risk and regulatory regimes change, asset managers need one source of truth from which to make learned decisions. As we mentioned at the outset, the asset management industry dwarfs so many others that get more attention from technologists. We believe that will change and change soon, and both industries will step up to collaborate better. AssetTech is indeed an emerging pillar to support the larger Fintech space.

For more information about data-frame investments in asset management, check out our field study, and learn more about how having Pepper Inside can help you and your fund grow ROI and AUM today.