It’s difficult for data and technology companies to fully service financial institutions’ front-to-back operations when behemoth providers are offering closely integrated capabilities at scale already.
Clearwater Analytics, however, has a strategy that it believes will work not by necessarily competing with the big aggregators, but by working with them and filling gaps that they don’t have the economies of scale to provide.
The Boise, Idaho-based company that has built a formidable reputation on its investing, accounting and reporting technology for insurance and asset management clients is in the process of acquiring more companies as part of an expansion that will extend its capabilities to the front and middle-offices. Multi-asset class risk modelling provider Beacon and insurance portfolio visualisation tool Bistro are seen as complementing Clearwater’s core services as well as those of other recent acquisitions – Wilshire Analytics, an equities and fixed-income risk management business, pre-trade front-office platform Enfusion, and French portfolio management provider JUMP Technology.
While there is already a high degree of interoperability between the businesses that will enable Clearwater to provide the backbone for a full-service offering, the company will continue to offer component pieces as standalone services to clients, including those who already use the big integrated companies.
“A lot of our customers, including some of the largest insurance companies and asset managers, have long-standing relationships with those big firms… ,” Clearwater Chief Strategy Officer Shane Akeroyd told Data Management Insightfrom Hong Kong.
“We are an ambitious company and we are going to have to work within the system and with our partners where those relationships are well established and working well”
Adjacent Opportunities
Beacon has been acquired to give Clearwater an even larger presence in the alternative assets space into which its established customers in the insurance sector are increasingly investing. Being able to offer capabilities in private equity and credit, hedge funds, derivatives and other esoteric assets, Clearwater hopes to capitalise on institutional investors’ diversification strategies that they’re employing as a hedge against increasingly low-yield and volatile capital markets.
Beacon has been a key part of fixed-income fund giant PIMCO’s technology estate since 2018 and is also an important element of alternative asset manager Blackstone’s technological plumbing.
“We have a desire to do more in alternatives, and that continues, but more importantly we want to meet the needs of our customers to handle more and more complex portfolios,” Akeroyd said.
Bistro, whose sale was concluded late in March, was developed by Blackstone as its in-house insurance and credit business portfolio visualisation tool. It already integrates data and analytics from Clearwater and Beacon and so was seen as a suitable addition to the line-up.
Logical Moves
Akeroyd said there are multiple rationales behind the acquisitions. Chief among them is the ability to offer a higher-value proposition to its customers; total investment management technology spend is estimated to be quadruple that of investment accounting technology, Clearwater’s core activity, he said.
As well, the new purchases will give Clearwater, which derives four-fifths of its business from the US, a broader international reach. Enfusion has a strong Asian presence, while Beacon has a global client base. A wide international base also means the company can work better with the large data and technology integrators, who all have a global footprint.
The accumulation of acquisitions by parent companies can lead to a data management headache as engineers attempt to knit together disparate systems and data models. For Clearwater, however, this has largely been mitigated because data integration is a core Clearwater competency and many of the individual businesses were closely integrated anyway, Akeroyd said.
“A significant part of the Bistro activity was Beacon related and vice versa,” he said. “And in fact, Blackstone was a shareholder in Beacon, and that is why we were running those acquisitions in parallel, because there was that connectivity.
“A lot of that connectivity, business logic between the businesses was already there.”
Nevertheless, Clearwater is looking to build a more flexible data model to optimise and strengthen governance between the separate businesses and their security masters. It is also taking the opportunity to assess where duplicate data feeds can be rationalised so that the data ingestion can be optimized
Growth Plan
A well as setting Clearwater on a path of diversification across the financial enterprise and geographic expansion, the new acquisitions have also offered the opportunity to tap into other parts of the financial ecosystem. While its core business is focussed on servicing the investment needs of insurers and their asset managers, the company sees new routes to embracing the asset management needs of other asset owners, including pension funds and endowments.
“It always takes time to build a full service offering but this is one of the fastest growing parts of our business and we will have a very interesting position in the not too distant future,” Akeroyd said.
Subscribe to our newsletter
