It’s been a busy first half for French data and portfolio management technology provider NeoXam, with expansion of its Australian operations, an addition to its management team and strengthened partnerships with established clients.
Amidst this busyness has been a focus on providing private-market data capabilities as buy-side firms increase their exposure to alternatives such as private equity and real assets. A key target for the company, however, has been private credit, which has proven to be one of the fastest-growing sectors in the alternatives space.
According to Preqin research the sector grew 10-fold between 2009 and 2023 to about US$2 trillion, and estimates put the sector rising to $3.5tn by 2028. McKinsey suggests the total addressable market in the US alone could be 10 times larger. Despite its size and increasing importance, market participants struggle to obtain the required transparency through data that’s currently available via public capital markets.
“There has been a big shift to private credit and along with that comes the complexity of dealing with data, that is unique to alternatives – a lack of standardisation,” said NeoXam Head of Group Strategy and Managing Director in the Americas Sarva Srinivasan.
“It’s unlike trading equities or fixed income, where there are consistent and unique identifiers; with Private Credit, how each institution represents it can vary,” Sarva told Data Management Insight.
Meeting Demand
NeoXam and a number of other data providers are responding to investor demand for alternative markets data as they diversify their portfolios to improve their returns and ameliorate risk amid market volatility and economic uncertainty. Among the Paris-based company’s offerings are NeoXam Aro, a reconciliation automation tool to help clients better manage complex loan assets and private credit instruments.
Sarva said the unique and diverse characteristics of the present investment management landscape calls for a more flexible data model and A.I driven automation, that can unravel the challenges of bringing data and processes together across fragmented technology architectures.
The company’s strategy is built on three pillars: making it easy for clients to procure data, process it and disseminate it. In the case of alternative data, that means ensuring clients get the best quality data that can be packaged into a standard format no matter what the source. For the latter, NeoXam has incorporated Gen AI capabilities to augment existing solutions.
“The key to any good output, whether it is risk, P&L, collateral, margin calculations or AI applications is good clean data, and to get good clean data, you need to either validate the data or reconcile the data – one of the essential components that we built,” he said.
Global Changes
As patterns of investment change geographically as well as across markets, NeoXam is positioning itself to meet the new data needs of clients around the world.
Earlier this year it opened a new office in Melbourne, Australia, to complement its operations in Sydney, which began two years ago. The new premises reflects a strategy within NeoXam to locate its personnel close to the areas of demand. Australia has become a key focus of NeoXam’s Asia-Pacific business, which the company says has grown rapidly and the move further bolsters its round-the-clock service capabilities.
Another milestone for the company was the appointment in April of Mark Johnson as managing director for the UK, Ireland and MEA.
Charles Sayac, Managing Director and Head of Continental Europe, said NeoXam’s strategy and vision for its global offices was driven by the data needs of clients.
“Asset managers, asset owners, and banks are navigating increasingly complex data and regulatory requirements across all regions, and across all asset classes, including private markets,” Sayac said. “Whether it’s private credit, infrastructure, or listed equities, we have been continuously expanding our solutions, to ensure those institutions, across all of the investment management value chain, have a unified lens to assess exposures, manage risk, and make timely, informed decisions.”
New Focus
The need for new ways to manage alternative assets data was highlighted by a recent report by investment technology specialist Enable and BattleFin, an alternative data provider. Their research found that almost all 130 portfolio managers they interviewed said that “traditional data and official figures are becoming too slow in reflecting changes in economic activity”.
The importance of alternatives data was underlined by the finding that three-quarters of respondents said spend on alternatives data would offer “an outsized informational edge in the near future”.
The gulf between expectations and delivery remains rife, however: four-fifths of respondents complained that integrating disparate data sets was their most frustrating challenge. As a result, 85 per cent said they expect to turn to third parties to provide their alternative data management needs over the next five years.
Management of private market data is occupying more expert minds, many of them focussed on wrangling unstructured data into a format that can be integrated into other data sets.
An A-Team Group webinar focussing on private data strategies to unlock private market transparency is due on September 10. Expert guests at a previous webinar discussed solutions to private markets data management through total portfolio view, which offer investment managers visibility into the correlations between all their assets, public and private, and how such a holistic view can help them derive more value from their trades.
Data standardisation has occupied managers for decades, with many arguing for a global set of codes that can help bring unity to the identification of assets, companies and other entities, which in turn will make managing the data associated with them much easier.
While NeoXam’s products help clients bring order to disparate data sets, Sarva is confident that industry standardisation will accelerate in the coming years. Already some strides have been made, for instance through the Global Legal Entity Identifier Foundation’s initiatives.
“About 20 years ago Credit Default Swaps had the same problems that Private Credit faces today and the market participants stepped in and started standardizing the dataset,” Sarva noted. “So hopefully things will evolve and there will be standardisation to these newer asset classes as well. It must happen, otherwise everybody will be repeating what someone else has already done”
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