AlternativeSoft is an award winning leading provider in Asset Selection, Portfolio Construction and Fund Reporting software, based in the UK and Switzerland. The company’s robust and proven software has enabled clients to thoroughly research and select alternative funds (hedge funds, ETFs and private equity funds) and the more traditional funds (mutual funds, index funds and other long only vehicles). AlternativeSoft works with some of the largest allocators in the world to ensure they get the most out of the software, whether that be to conduct in-depth risk analysis and management, or to track fund exposures and liquidity. Consequently, the company has been established as the software of choice for portfolio construction, and been commended by its clients for enhancing report automation and improving the efficiency of their quantitative investment processes. Its clientele consists of the largest banks, small or large fund of hedge funds and the world’s biggest Pension Funds. AlternativeSoft is all about robust portfolio construction; optimising it, measuring its extreme risks, reporting it, creating fact sheets, computing its alpha, and selecting mutual funds or hedge funds.
Today, HedgeThink presents an interview with Laurent Favre, Founder and CEO of AlternativeSoft, covering product development, the current fintech industry landscape, the fintech changes in the hedge fund industry, outlook for the next 5 years, and evaluating hedge fund technology providers.
Laurent holds a bachelor’s degree in economics and an MBA in finance (2000), both from University of Lausanne, was professor of economics and mathematics for 2 years in Switzerland, published several papers in the Journal of Alternative Investments, co-authored a book on fund of hedge funds construction (Wiley finance 2005), co-authored a book on Tactical Asset Allocation with Hedge Fund Indices’ (Elsevier Press 2006), worked for Investment Solutions, UBS Wealth Management, Zurich, Switzerland, as head of Tactical Asset Allocation from 2000 to 2004, where he implemented the investment strategies in CHF 110 billions for private clients, in CHF 30 billions for mutual funds and was involved in the construction of the CHF 6 billions UBS Wealth Management fund of funds in 2003.
HedgeThink: Can you tell us about yourself, your background, and your education?
Laurent Favre: 8 years at University in Switzerland, 4 years in UBS Zurich, 4 years in First Rand fund of hedge funds group in London, 6 years developing AlternativeSoft. I learned that it is much more difficult being an entrepreneur than an employee.
HedgeThink: How did the experience in UBS Wealth Management Zurich shift your career and bet in software for portfolio management.
Laurent Favre: I learned Swiss quality and that Swiss quality sells around the world. I learn Excel VBA, something we do not learn at University and my current employees use VBA.
HedgeThink: What can you tell us about AlternativeSoft and how you differentiate yourself from the competition?
Laurent Favre: We are a fintech startup with 29 employees located in London and Eastern Europe. We differentiate with A) an easy to use financial software to build portfolios with funds, B) a database linked to any funds (long only, hedge funds, private equity) available on earth.
HedgeThink: You offer portfolio Construction Tools, why is it used by your large pension funds clients?
Laurent Favre: Swiss quality service at an affordable price in USD.
HedgeThink: What are the goals you are setting at the present moment for the company?
Laurent Favre: My strategic goals are secret. I can reveal that A) we are the first software company to offer free hedge funds exposures collection into our software, B) we are the first company to offer in a single software the ability to handle hedge funds, long only funds and private equity. My more long term strategic goals are only revealed to our large pension funds clients.
HedgeThink: What type of clients are you targeting with the new strategy?
Laurent Favre: Pension funds, sovereign funds and family offices. They need help in simplifying on how they invest in hedge funds and we offer them that. We do not target financial private advisors.
HedgeThink: How can wealth managers using AlternativeSoft software do improve their activity and performance?
Laurent Favre: In three ways: A) We offer free customized funds and portfolios reports using Excel API. It saved time versus doing the report by yourself or money by outsourcing it. B) We offer at a cost a software model able to justify to the Investment Committee why the addition or redemption of a fund is good/bad for the existing portfolio. C) The software covers the full investment process (CRM, funds selection, all funds available on the market, portfolio construction with these funds, portfolio management with subscription/redemption, customized reporting, free support with quantitative London employees).
HedgeThink: As the alternative industry, hedge funds and asset managements shift, what are some of the changes that you’re seeing in the industry? And what’s your vision going forward?
Laurent Favre: I see changes for 2015 and 2016 which are A) factors investing, B) the end of financial advisory for individuals due to robot advisors. In 2017, a) will disappear and a new wave of different robot advisors will target larger asset management companies.
HedgeThink: Where do you think the future lies, systematic or discretionary trading / investing?
Laurent Favre: I am not good at that, otherwise I would be managing UBS Wealth Management money.
HedgeThink: There has been a lot of talk about regulation in the industry. Where do you see it going from here special when software and algorithms are now in the DNA of investing and trading?
Laurent Favre: “I have not view on this question 10. and you should delete it’.
HedgeThink: What are the unique specifics of AlternativeSoft for investors, advisors and funds?
Laurent Favre: AlternativeSoft software is the only integrated software with several models: a CRM, access to all funds on the planet, select funds, build portfolios with these funds using institutional models, manage these portfolios with buy/sell trades, add private equity in the portfolio, create a customized portfolio report. This is only the start.
We do not sell our software to funds.
HedgeThink: JP Morgan CEO Jamie Dimon recently warned investors and those in the banking industry that “Silicon Valley is coming”. How do you see AlternativeSoft position in this statement?
Laurent Favre: I prefer not to listen to Jamie Dimon. He does bank and is not a fintech reference. I prefer to listen to Eddie George from London or Tim Cook from Apple. As working in AlternativeSoft London, I would state that London is at the fore-front of Fintech. Did you know that London had 44’000 fintech workers vs 11’000 fintech workers, in 2014? The future of fintech is London thanks to the massive pool of workers in Europe and Eastern Europe.
HedgeThink: What are your personal Investment Trends views that you highlight in what regards Fintech and alternative investments?
Laurent Favre: Fintech: There is clearly too much private equity/venture capital going in fintech companies.
Alternative Investent: Investment in alternative (hedge funds, real estate, infrastructure, I.e. illiquid investments) is justified for the pension funds, because the premium have disappeared in equity, fixed income, commodity (i.e. liquid investments) is 0%.
HedgeThink: There are hundreds of startups working on various alternatives to traditional banking such as Betterment and Wealthfront. What are the position and ambition of AlternativeSoft in this new FinTech alternative investment world?
Laurent Favre: Finally, you asked me this question. Did you know that Betterment has USD1b under management on its web platform, only 90 registered investment advisors, company is valued at USD0.5b, but Betterment only generates USD3.5m revenues? If you did not know that, I let you do some calculations on this company P/E ratio. AlternativeSoft will not enter this space where individuals (with or without the help of advisors) are able to invest their money.