bobsguide spoke with Bruce Berger, COO & CFO of New York based equity investment firm Atlantic Investment Management, and Chris Grandi, CEO of hedge fund solutions provider Abacus Group, to discover how their commercial partnership typifies IT infrastructure for mid-size investment firms in 2018.
Explain the service that Abacus Group provides to financial institutions.
Chris Grandi: The ethos behind the company when we launched a decade ago was a belief that the trend of outsourcing IT would only become more important for investment managers. When you look at information technology infrastructure in the industry historically, many funds had managed this internally, but we saw a growing trend in the opposite direction. We also believed that cloud technology would become a much bigger player in this space.
Our typical client engagement is a completely outsourced model of technology. We work with our clients to manage any order management system, any accounting system, any risk system, and IT all the way down to core functionalities such as managing emails.
We essentially built our own private cloud that spans five different data centres in the US and Europe. By doing so we centralized all technology and most importantly the management of all that technology; we are evaluated more often when things go down than when things go well (that is just the nature of IT) and so having that control was very important to us.
We have 350 clients across the US and the UK, and we still believe this trend is relatively early in adoption i.e. there is still a large percentage of the investment management community that is internally managing IT, so we are certainly optimistic about our growth moving forward.
Where does Atlantic sit in the investment management landscape?
Bruce Berger: We oversee approximately $1.3bn in AUM. Our strategy is long/short equity and we have 28 employees; half our staff is investment personnel and half are non-investment personnel.
What was the initial problem you were looking to solve, or opportunity you were looking to take advantage of, by outsourcing your IT?
BB: Everything we ran internally was moved to a complete cloud-hosted solution. We were in the last batch of firms located in space hosted by UBS and at that time UBS had a partner relationship with one of Abacus’ competitors for anything we did not run internally. When they stopped hosting space about four years ago we started the search for an outsourcing provider.
We have been around for 25 years and saw this as a natural progression. There were three or four strong competitors in the market at that time; ultimately we selected Abacus because we thought the company was positioned well, and had the right reputation and levels of service.
At that time we had already outsourced our email system, we also outsourced part of our disaster recovery service. A significant advantage with Abacus was that they were able to pull all the outsourced functions together into a single vendor.
Internally, were there any reservations about moving your IT services to the cloud?
BB: In 2010 it would have been a different question, but by this time – only four years ago – we were already comfortable with the cloud, especially as some of our business was actually already in the cloud by the time we engaged with Abacus. The question was less about whether to migrate to the cloud and more about how we could do that in a way that made sense from a reliability, security, latency, and servicing perspective. So it wasn’t a choice between a cloud and an internal solution, the decision was which provider would give us the best overall solution as all of the solutions that we looked at were cloud providers.
Chris, is that a standard level of industry comfort with the cloud, per the conversations you have with other clients?
CG: It is right now, but as Bruce mentioned between 2010-2012 we were definitely facing some headwinds. That is interesting in itself because the cloud was not new at that point; I have always been a believer that the investment management space is pretty slow to adopt new technology, it tends to be populated by creatures of habit which is why we were having a lot of conversation trying to convince investment managers about the security and benefits of the cloud. I would say it was 2013 when the general industry perspective of the cloud turned.
The sceptics are still out there, but more and more they are in the minority. The conversations we have with the funds that are still hesitant about the cloud are interesting. I think there is an inherent paranoia around safety. So much of what we do now is about cybersecurity because of real risks. When we have these conversations we highlight that the most insecure place that you could put your technology is in your office.
How has your relationship between Atlantic Investment Management and Abacus developed over time? Is the partnership today operating the same functions it did in 2014?
BB: It has evolved. We had more onsite staff from Abacus when we first started to get us through the first year of growing pains. Today on a monthly basis there is very little onsite staff; I remember saying to Chris that if it all works I never want to see anyone from Abacus in our office.
What I like about Abacus is that they operate one model, obviously there is some customization within that model but there are some things that they just don’t do. I was happy to hear that because there is a good reason and a good philosophy behind this decision and I think the standardizations of the service helps Abacus and the client.
I would say the biggest evolution since we began our relationship has been Abacus’ Client Portal development and development of available tools including reporting. I think that this has created a huge competitive advantage for Abacus.
Is moving to the cloud now less about competitive advantage and more about keeping pace with the rest of the industry?
BB: We had migrated our email system to the cloud by 2011 and many of our clients were nervous about it at the time. Nobody knew what the cloud was or understood it, but they were still uncomfortable. Fast-forward to 2016, and by now if you weren’t operating in the cloud clients were asking “why not”. In a five year period clients transitioned from no comfort in the solution to expecting it, so it is definitely unusual to find a firm our size that isn’t in the cloud today.
Is there any client feedback on the product you have had recently that you are looking to feed into the Abacus product in 2018?
CG: Cybersecurity has been a trend for a while now and will continue to be so for the foreseeable future. Specifically, some of the newest features we’ve developing for our Client Portal center around transparency, being able to access any type of information and how you are protected from an alerting standpoint.
It is really about providing real time assurance to our clients that they are protected from cybersecurity risks. This is where we are investing most capital, including recently hiring a chief information security officer, as we believe this will be a critical differentiator for our company moving forward.