Heard at Ops: Sia Partners’ Bharat Sawhney on streamlining alternative investment operations

As part of the Heard at Ops series with top operations and technology leaders, Bharat Sawhney, Partner, Wealth & Asset Management at Sia Partners, discusses the opportunity for operations leaders to be transformation agents.

Q. Describe the operational hurdles to alternative investments.

A. Alternative investment has been around for a while yet does not fit into the traditional post-trade operations workflow. When I started my career 20 years ago, I was in a middle office role supporting alternative investments, which was incredibly manual. But back then, it was only for a select group of institutional investors. Over the past 10 years, alternative investment has been democratized.

Fund managers have found a way to reduce the minimums to get into the retail channel, which is exciting for retail customers. But firms have been unable to scale the operations to support the increased volume.

The operational hurdles on the buy-side are the lack of common identifiers and the lack of transmission of data that leads to reconciliation issues. On the wealth management side, the issue is with the amount of paperwork needed to onboard a customer. And, if it is a direct investment, it is going from the broker-dealer to the operations team to the fund manager – and that can take two or three weeks, sometimes longer, to get clients onboarded into the fund.

Given the democratization and the increased volume, we are starting to look at what can be done in-house and what we need to do as an industry to start to resolve these issues.

Q. What are the opportunities for standardizing data and operational processes, and what benefits would that bring?

A. On the buy-side, there are things you can do internally. If you think about private investments, a lot of data comes from financial statements. Look at your own internal ecosystem and how you gather data. You should have a sophisticated process in place for data management, be able to push it through a data governance framework, and then feed the data to downstream systems such as reporting.

On the wealth side, there is an opportunity to use artificial intelligence (AI) and machine learning to enhance and streamline processes such as subscriptions, reconciliation, and valuation.

From an industry perspective, we must work through the common identifiers that we can agree on and have more industry-based solutions. But the biggest issue is adoption, and all sides need to come together to collaborate on a common approach rather than work on different solutions. There needs to be more industry sessions that bring together the buy-side and sell-side on how best to define the process and operationalize this effectively.

Q. There are emerging solutions that can drive that forward. Can you expand on that?

A. DTCC has a solution that is starting to gain a lot more traction. Their Alternative Investment Product (AIP) Services platform works well for the liquid side of the investments.

But the key issue is with the private side. Private information is limited, both in how you get the data and how you pass it downstream. I would say that the end goal – if we get there – is tokenization. If you can successfully tokenize some of these assets through the blockchain, that is another way to streamline the process. Realizing that’s some time away, we need to think about what we can do in the interim and explore non-traditional approaches.

Q. How is the role of the operations professional changing?

A. Operations is the lifeblood of an organization. You can build all the greatest and fancy products but if they cannot be operations supported, you place yourself at a competitive disadvantage. With the number of new entrants that are coming into play, the barriers to entry have been lowered.

Operations leaders have an opportunity to be transformation agents – to start to adopt the right technologies and assess what can be done to streamline, reduce risk and make these core processes more efficient to support the sustained growth of the business.

Bharat Sawhney is Partner, Wealth & Asset Management at Sia Partners.