A flippant, fearless, and fundamental countdown of big money investing.

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#34 Technology

There’s an App for That

A stack of yellow legal pads greeted Ryan Bailey on his first day as investment chief at the Children’s Medical Center in Dallas. Transition notes from his predecessor? Bailey had no predecessor. On the pads were the portfolio, institutional knowledge, and handwritten accounts of $1 billion he was now in charge of. 

This was 2014. 

“I was a one-man band, brought in to set up Children’s first investment office,” says Bailey, who now oversees $1.5 billion across four capital pools. “I knew I had to be on the road, meeting managers, and still run things from anywhere.” The flipside of starting, not inheriting, an investment operation is that clean slate. Well, clean-ish yellow paper. 

“How do we get all of this info into a system that’s searchable? That was my mission.” So Bailey went shopping. 

Until very recently, asset owners serious about real-time oversight of their (whole) portfolios built custom. BP’s pension fund for years ran on an ever-evolving monster called Octopus. (Former CIO: “Because it has many tentacles.”) The Alberta Investment Management Corporation commissioned its ‘Dynamic Dashboard’ in 2009. The 1.0 version was a 30-page bimonthly printouts (seriously), still a major improvement over Excel and quarterly reports. By 2012, then-CEO Leo de Bever cruised his C$71 billion (US$55 billion) portfolio via iPad in the Amsterdam airport. “It’s risk exposure; it’s a current outlook on the markets; it’s your current asset mixes,” he described by phone at the time. The cost? “Not de minimis,” de Bever demurred. “For me, it’s an integral part of what we do.” And the Canadians have never been afraid to spend money to make money. 

Until recently, Ryan Bailey didn’t have an analyst; he definitely wasn’t going to build an Octopus. Luckily, someone else did it for him. Children’s is early adopter of Solovis, off-the-shelf software available since January 2015. Created by alums of outsourced-CIO shop Investure, the system pulls in live data across asset classes, aggregates it, and slices and dices at will. “Take a ‘what if’ scenario,’” Bailey explains. “What if I’d hired this manager three years ago or all the way back in 2008? You’re able to do that, and from wherever.” 

Solovis picked up about 20 clients—all asset owners—in its first 18 months, and $85 billion runs on its platform. It’s a niche product, says co-founder Josh Smith, and that’s the point. Weighing a direct co-investment in Argentinian farmland, and want to stress test your liquidity for a 2008-style crunch, given your 5% annual disbursement mandate? Smith’s your guy. Run a fund-of-funds? Keep shopping. The price tag: $60,000 to $150,000 a year for the base software, support team included. 

More than a legal pad, less than an Octopus, and about on par with an analyst. Which seems appropriate. 

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