The University of California’s investment office faced issues like many other pensions its size: The combination of increasingly sophisticated stakeholders, a rising need to blend outsourced and in-house investments, and the complexities of managing alternative investments such as private equity and hedge funds as part of its $125 billion portfolio was putting a strain on its legacy fintech platform.
In looking for a technology provider to help transition to a more agile platform, UC Investments had three primary goals:
- Create a total fund view that incorporates individual data sets from all private assets (including private equity, absolute return, real estate, and real assets) and public assets.
- Streamline communication and information sharing for risk, compliance, and reporting across departments
- Overhaul a costly legacy technology infrastructure to an agile platform that better met UC Investments’ needs
UC Investments recently announced a new partnership with Solovis, a multi-asset class portfolio management, analytics, and reporting platform, to accomplish these goals. The expected result? A cool $2 million savings per year over the next decade as a result of incorporating the portfolio into Solovis’ service. And UC Investments’ Chief Operating Officer Arthur Guimaraes plays a key role as part of the collaborative team that fine-tuned the platform, ensuring all of the pension’s key requirements were addressed.
The initial issue UC Investments sought to solve was its “fundamental need to streamline the complexities of managing a multi-asset class portfolio, while also addressing the perspective and needs of multiple constituencies,” the office said in a case study published on the Solovis’ website.
“Asset owners have no single, standard data source,” the case study says. “As a result, they are continuously faced with poor data quality from third-party systems or spreadsheets that lack standardization within and across asset classes.
“In addition, asset owners are victims of convoluted, outdated manual processes, resulting in endless frustration…The majority stuck in this loop share the conjecture that ‘this is just the way it is’…However, in its quest to modernize, UC Investments discovered that the status quo is no longer necessary,” the investment office wrote in a case study. “By seeking out an innovative technology partner willing to disrupt existing paradigms, UC was able to make data inconsistencies, irregularities, undocumented assumptions, and just flat-out wrong data things of the past, while at the same time streamlining processes and providing a holistic portfolio view uniting investments, operations, and risk teams.”
According to Guimaraes, a major benefit the Solovis platform provided is its strengths in private investments.
“We have a large book of private assets,” Guimaraes said, “and we are looking more and more into it, but when I looked around for the tools that are available to investment professionals, candidly, there were a couple of databases. There was nothing that [was enough], and so that sort of inspired me to ask, ‘what if we could actually solve an industry problem, what if we can create a system that would work for all private assets, irrespective if they’re different?’”
Guimaraes shared his idea to “change the way the industry thinks about technology” with Solovis Cofounder Josh Smith, and volunteered his experience in project management and investments to benefit and improve the platform.
Smith said, “the average institutional investor can reduce process touch points, data issues, and reporting times by over 75%, with the platform.
“[The partnership] with UC Investments drove us to mature very quickly as an organization such that we now have very robust process and project methodologies in place and the ability to handle large-scale projects in a very efficient and effective way,” Smith added.
UC’s team said the system benefited its system in several ways, including:
- A single source of truth for ‘core data’
- The ability to support the needs of each persona across asset classes
- The fundamental need to trust risk assessments, overcoming poor historical data
- An efficient way to manage multiple pools of capital
The platform seeks to provide as much information as possible regarding an investor’s assets, including valuations and performance. “When I saw the technology and things they could do, for example, performance on the fly, which is not easy in any performance system, to me the light bulb also went on to say ‘they have something special here.’ It’s a really powerful, innovative, and lightweight solution,” Guimaraes said.
“The discipline of project management is something we brought along—because this is now our data platform and it was critical for myself and my team to make sure we also had the project discipline around when getting there,” Guimaraes said.
“Benefit No. 1 from our case study is that all asset classes are on a common data platform—and you don’t have to have a different system to transform the data—you get rid of all of these extra infrastructures. Private equity, real assets, real estate, absolute return—they’re all different, and they’re all on a common platform, so they’re all speaking a common language, and I think in investing that’s actually very powerful.”
In a recent press release, Solovis noted that its platform is being incorporated into some of the country’s largest institutional investors, “with market demand continuing to grow as word of its value spreads.” For example, State Street Corp. recently announced a partnership with Solovis as well, incorporating the company’s analytics application to “seamlessly manage data and traditional accounting book-of-record with alternative asset data, including third-party information.”
Central to UC’s success is the quality of the data it is able to achieve with the Solovis platform. “This implementation also allowed us to clean up a lot of our historic data, to a point where I feel very good about it, as well as our current data, and data that we think about moving forward, and [especially] how we could do it with the same system.”
“The data is at-least-as-good quality, and in many cases we’ve proven that it’s better,” Guimaraes said. “We actually capture all of the data [with Solovis]… “Investment book of records, or performance book of records, or accounting book of records—in reality, the powerful thing about Solovis is that it has them all.”
Guimaraes added that the presentation of this data is customizable, pertinent to the information each investor believes is most important to them, for each particular asset class.