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Modern Investment Process Management

Client Background

A global fundamental hedge fund manager with $1 Billion in AUM in 2017 when their journey with EDS began. In 2023, the fund’s AUM is more than $3 Billion.

 

The Challenge

The investment team set out to improve the capabilities of their disciplined, yet heavily Excel-based investment process, and to help them drive more success from it. Because it was heavily Excel-driven, it lacked the ability to analyze historical decisions and inputs, which was a critical need in order to drive the best performance possible. In addition, their intelligence gathering process was too fragmented and spread out across Excel, Word, email and other systems. They felt they were missing opportunities and not seeing the risks. The team sought a system to centralize all internal and external intelligence, including ideas, models, price targets, shared screening/ranking Excel sheets, all notes and thesis documents, broker research, etc. and any other content that was core to decision-making. With no obvious solution in the market at the time, the CIO sought to hire a data scientist or team capable of building a scalable solution, but had significant concerns about the cost, commitment, and transition process taking center stage. Above all, this very successful fund did not want to create friction with the investment team.

The Solution

A high performance, easy-to-use and configurable workflow solution built around their investment process – implemented quickly and affordably – streamlining and eliminating Excel processes, providing valuable feedback, and supported by a highly experienced team of former investment professionals and quantitative analysts. They started with a low-risk, proof of concept (POC) that required minimal commitment from the client and proved the value upfront – especially that their team didn’t need to change any behaviors.

The Result

Over the past seven years with EDS, the firm has more than doubled AUM. The firm streamlined what had required multiple applications, vendors and manual processes into one, centralized, yet flexible solution across Idea Generation, Research Management (RMS), Portfolio Construction and Risk Management. They realized substantial advantages through working with EDS to maximize the value of their investment process:

  1. Decision-making. With all their intelligence centralized, and the ability to actually understand where they were succeeding and what their blind spots were, decision-making timing and the success rate was improved. Positions that had “run their course” or mismatches in the portfolio were more easily identified, and most importantly, they knew which positions to “size-up”, “size-down” or sell all together with much greater confidence.

  2. Time savings and research optimization. EDS replaced multiple shared Excel processes, as well as centralized all their research, providing a user-friendly, productive environment to research, discuss and select new ideas. EDS empowered analysts to surface their ideas more readily to decision-makers, and those decision-makers were better prepared to select the best ideas.

  3. Rapid implementation and strong compliance. The team was able to modernize and digitally transform their investment process, with little friction, creating greater accountability and transparency within the investment team. Importantly, all Intellectual Property (IP) was secure and kept in-house, achieving “best practices” compliance and reducing leakage due to any employee turnover. Years later, this compliance practice led to an effective regulatory response, quickly highlighting their disciplined process was the center of their success.

  4. Cost-effective, flexible and scalable. EDS proved to be affordable, user-friendly and more flexible than the limited alternatives.

  5. Teamwide optimization. Initially adopted by a small team, EDS’s successful adoption led to company-wide implementation, including users across multiple applications. In addition, EDS created several, fund specific workflows, ensuring their vision was precisely implemented.

  6. Cost savings. Over multiple years, EDS replaced other solutions, bringing six vendors down to two, resulting in significant cost savings.

“EDS is like a real-time investment committee.”

“With the EDS Platform, our deep fundamental process is centralized and measurable – like having our investment team together 24/7, making sure our portfolio always represents our best and highest conviction ideas.”

– Fund Chief Investment Officer

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