Global Accounts Q&A with Sam Marsh, MD, Institutional

28.10.2021

AS SEEN IN THE DRAWDOWN

Sam Marsh, MD of Alpha Institutional recently sat down with the Drawdown to discuss Alpha’s newly-launched global accounts solution, aimed at bringing efficiencies when setting up international business accounts and SPVs.

The Drawdown (TDD): Alpha recently launched its global accounts solution. In a nutshell, what is it?

Sam Marsh (SM): At a high level, we’ve launched a solution that enables us to significantly accelerate the time it takes for GPs and their service providers to open overseas accounts for the underlying entities within their investment structures. With us, accounts that would have taken our clients months to open are now typically taking less than a week.

TDD: How did the solution come about?

SM: The solution is the result of two specialist divisions we created within the Alpha group. The first was Alpha Institutional in 2018, and the second, Alpha Platform Solutions, which has been developing our accounts technology. As these divisions worked more closely together, we could see a growing demand for an accounts solution in the alts space.

We’ve been delivering this solution since the second half of last year and have seen it gain considerable traction. Up until now however, we’ve intentionally kept things quiet as there was so much demand within our existing client base, and we wanted to make sure we’d perfected the experience before going out to the wider market.

By working closely with our existing FX client base and by being actively involved in the market, we realised we had a unique set of capabilities that might help solve a big challenge in this space. What’s increasingly happening is the complexity of the way funds are structured means the time and cost it takes for traditional banks to process, accept and then monitor these entities, often results in unnecessary friction and time delays for both client onboarding and processing transactions. This is resulting in a service that is suboptimal and sometimes not even commercially viable when considering the speed of execution needed by a GP.

TDD: How is your solution different to what a bank does or offers?

SM: Traditional banks are constrained by outdated KYC processes and systems. Our accounts solution is faster than a bank’s, which means we don’t restrict a GP’s investment timeframe. Our accounts solution has been built specifically for this market; we understand the complexities of alternative assets and have combined this expertise with purpose-built technology to ensure we can onboard clients incredibly efficiently and in a highly controlled manner.

Our online platform also enables clients to view and manage all their accounts from one single login, and across multiple jurisdictions. We then provide the option to configure different access rights – from a top-level view of accounts across the entire investment structure, right down to individual logins for individual accounts.

TDD: How are you able to be so quick?

SM: AML regulations impact all financial institutions, so we’re not avoiding these rules or our responsibilities. In our experience, with the growing demands of AML, this can’t be met with a one size fits all approach – it requires bespoke technology and compliance expertise specifically dedicated to alternatives.  Without this, from a traditional bank’s perspective, onboarding and monitoring entities is time-consuming and resource intensive, and therefore without immediate borrowing or forecastable flows, the return on investment is often not worthwhile. For the GP, the bank’s lack of appetite creates uncertainty over whether accounts will be obtainable, and means that even when they are, the process is long-winded.

We realised a tipping point had been reached. Not only is the appetite not there from banks to invest in change, but they are adding in clients all the time, which creates additional complexity. In our case, when we started onboarding SPVs and investment funds we realised that for initial onboarding and ongoing monitoring to be done effectively, you not only needed a highly focused compliance team, but also a highly bespoke technology stack to support them. We took the time to build a dedicated system to take on the complexity of this market and inject automation in order to enable fast but controlled onboarding.

TDD: How has it gone so far?

SM: The reaction from the market has been very encouraging; we’ve been seeing for quite some time that there is clear appetite for this kind of solution, with GPs who have had their fingers burnt by slow banks in a deal process, as well as service providers frustrated by how long it takes to open an account and the drain this has on their time and resource. We followed up on this feeling by commissioning an independent research study with the marketplace, the findings of which confirmed this is a widespread problem across all regions and all fund types. Last year we added international jurisdictions to the solution, including Luxembourg, The Netherlands and Ireland. We have since launched version 2.0 of the client portal in the first half of 2021 and are adding more local accounts in Asia and North America in Q1 2022.

TDD: The solution was the result of specific working groups, does that mean there are more innovations to come?

SM: Very much so, and we’re already in the process of looking to add more products and services focused on supporting the alternative investment market and the needs of GPs and their service providers.

We are not a bank, nor do we intend to be, but our vision in the alternatives space is to become a better, digitally enabled alternative to one. Having that role within the industry will allow us to better interact with our clients’ workflows, systems, reporting and service providers.

TDD: How does this solution improve the overall health of the private equity ecosystem?

SM: Anything digitally enabled helps make this industry more efficient. While there might be complexities in the alternative structure, which create complexity in the traditional banking world, our focus is to simplify that so a GP can focus on its core functions of investing and growing businesses. This is about removing administrative challenges and barriers.

It also reduces a manager’s operating costs; the more resource you have to apply to non value-added work is drag on performance, so our focus is on how to continue minimising that.

TDD: What are your longer term plans?

SM: Currently, we’re best known as a FX specialist. Our ambition is to become the leading provider of financial solutions to alternatives. Our focus is the market not the product and we aim to solve broader client challenges. Our expertise is being commercial; stripping out the complexity and bureaucracy and leveraging our bespoke alternatives infrastructure. We are deeply committed to this space, listening to the market and developing solutions that meet client needs.