Private Markets

Unlocking the Hidden Data Potential

Mitigating data management challenges in the private markets space

July 2021

As institutional investors turn to private markets for higher returns in a low-yield environment, asset owners and managers are plagued with data management challenges and converting data into actionable insights. As an industry that heavily relies on manual processes, disparate systems and spreadsheets, private markets data tends to be siloed and difficult to access.

After the rebound that the private markets witnessed in 2020, the need to holistically address data and run real-time, advanced analytics has become a priority for asset owners and managers. To help them manage data in the private markets space, we partnered with Canoe Intelligence. The partnership gives asset owners and managers an integrated experience, where traditionally onerous and manual alternative investment workflows are automated and streamlined, reducing processing time and delivering important information to clients faster.

Dax Johnson, global head of our asset owner product talks to Jason Eiswerth, chief executive officer of Canoe Intelligence, to explore how Canoe’s purpose-built technology can help automate the fragmented, time-consuming and costly manual workflows related to alternative investments for institutional investors, capital allocators, wealth managers and asset servicing firms.


Dax Johnson

 


Dax Johnson
Global Head of Asset Owner Product
Jason Eiswerth

 


Jason Eiswerth
Chief Executive Officer of Canoe Intelligence

 



Dax:
We are excited about our partnership. Thank you for joining me today. Tell us about the key benefits that your clients are achieving by using Canoe?

Jason: It’s great to be here and we’re absolutely thrilled to be partnering with the State Street team. Our clients tell us that they chose Canoe’s purpose-built technology to accomplish three main objectives. First, they want increased speed. More specifically, they want to accelerate their existing processes of managing and retrieving performance metrics from alternative investment documents and generating reports with that extracted information. Ultimately, they want to reduce the time it takes to access and take advantage of data and statistics available to them. Second, clients seek greater accuracy at scale. They want to improve the way they capture information from alternatives-related documents and eliminate potential errors that tend to be a regular part of any manual data collection process. Third, they want to increase and improve their access to data. This can be achieved through greater amounts of data captured by Canoe’s extraction process or by increased transparency available to them through tools designed to centralize and allow them to control their processes in an highly optimal way for their business.


Dax: What is different about the technologies Canoe uses to ingest and process data versus other automation tools in the industry?

Jason: Canoe is different from other automation tools in a few key ways. First, Canoe is purpose-built. We’ve taken a bottom-up approach to solving the specific challenges of document management and data extraction for alternative and private investments. This manifests itself in an end-to-end platform and workflow that seamlessly transforms and elevates existing processes.

Canoe’s technology relies heavily on its machine learning foundation and shared intelligence framework. This means that each individual client benefits from the learning and training established across our clientele and our growing fund master database of more than ten thousand funds.

Jason Eiswerth

Second, Canoe’s technology relies heavily on its machine learning foundation and shared intelligence framework. This means that each individual client benefits from the learning and training established across our clientele and our growing fund master database of more than ten thousand funds. When you work with Canoe, you're not starting from scratch. You don’t have to train a new system. Instead, you immediately benefit from a peer-reviewed ecosystem of knowledge developed in partnership with some of the largest institutional investors in the world. This is entirely unique and differentiated.

Third, we don't use optical character recognition (OCR), which most generic data capture tools depend on for their results. OCR can be very effective with extracting images and text from highly structured documents. However, we’ve demonstrated that OCR technology does not perform reliably when working with unstructured private markets documents and statements. Instead, we use a combination of natural language processing, text anchoring, advanced table detection, coordinate recognition, meta-data analysis, and other similar tools to achieve the most reliable and robust extraction possible. All of this work is done within our shared intelligence framework that creates highly repeatable patterns that identify the data within the documents our clients need.


Dax: Is there an industry perception that automated data capture and extraction might miss information or do you think there is widespread acceptance of this type of technology?

Jason: Historically, there has certainly been broad skepticism regarding most data capture and extraction processes and technologies. However, I believe that any skepticism that existed is waning rapidly in the face of the proven accuracy, time savings and depth of data extraction that automation currently provides. The market is definitely shifting to more widespread adoption of technology for this purpose and in a way that allows our clients to better scale their businesses and focus on providing differentiated service and investment experiences for their clients and constituents.

Further, we do recognize the importance of building trust within a financial services technology product. Understanding our clients is key to that trust and several members of our senior management team have years of experience as principal investors with direct responsibility for managing limited partnership positions. This gives us a unique perspective into our clients’ needs. That perspective, along with an established client feedback process, drives our validation framework consisting of business, accounting and investment rules used throughout Canoe’s technology.

We understand that in financial services the information that is extracted and delivered always needs to be accurate. Depending on clients’ needs, we overlay additional validation frameworks, maker/checker/reviewer workflows, and other compliance-oriented controls. In this way, we provide clients with full transparency and the ability to audit and influence their data directly in the tool. We’ve found that this transparency is crucial in building the trust of our product. Canoe is not and will never be a ‘black box’. You see exactly where the data is coming from within every single document and it can be reviewed any time. This approach is critical as automation becomes more mainstream.


Dax: Can you quantify the improvements in speed and accuracy that some of your clients have experienced when adopting Canoe technology?

Jason: We can absolutely quantify the improvements in speed and accuracy that our clients experience and we do so on a regular basis. It is the main component of the consistent positive feedback that we receive from them. The immediate focus is always on speed. Our clients tell us that some of their processes that historically took weeks or even months now take only them a few hours to complete. Generally, we hear that our clients experience upwards of 80 percent in efficiency gains. Our clients also report more than ten times increase in operating leverage per individual, which frees those resources to focus on other projects of greater value. We recently worked with a client who grew their alternative portfolio by 100 percent while simultaneously reducing overall operational resource allocation by 75 percent. Improvements will naturally vary client to client, but the feedback in aggregate has been overwhelmingly positive.

In addition, instead of gathering just the required data points from documents manually, clients can now access every data point from every document almost instantaneously. Not only are clients saving an immense amount of time, they’re gathering an immense amount of additional data to be used for further analysis. And, from an accuracy perspective, Canoe’s technology eliminates manual errors, while also validating data and proactively identifying potential mistakes in general partner (GP) reports.


Dax: What’s the role of human expertise in the State Street/Canoe partnership?

Jason: Real-world, human expertise is at the center of Canoe’s technology. Canoe is not simply a back-end technology that sits behind the scenes: it is an integrated platform that grows and learns with the experience of the Canoe team and all the clientele we serve. The partnership with Canoe will help State Street streamline its alternative investment document and data workflows and ultimately, serve clients more efficiently and effectively.

An important part of any issue resolution process is in improving the automated validation rules. Having a team of experts continuously reviewing and refining our validation logic means increased automation and faster delivery to our clients.

Dax Johnson

Dax: I think what you are saying makes a lot of sense. Every day, human expertise continues to play a major role at State Street as well. Our expert team will oversee the document ingestion process and review checks on each document before triggering downstream processes. If documents are found to be incomplete or erroneous, our team will work with the GP and if needed, liaise with the client. An important part of any issue resolution process is in improving the automated validation rules. Having a team of experts continuously reviewing and refining our validation logic means increased automation and faster delivery to our clients.


Dax: What are the benefits for our clients when an asset servicing partner like State Street is using Canoe Intelligence?

Jason: While we have other administrators leveraging Canoe, State Street is the first custodian to leverage our technology. So, State Street is differentiated in that regard and it positions itself as an early-adopter in automating document management and data extraction. State Street’s clients will be able to access more of their data, faster and more accurately. With this, clients will likely be able to do more with their data and ultimately, find new ways to serve their end-clients and constituents more effectively.

Dax: Thanks, Jason. Our services span across document capture through valuation and transaction processing. While some of the underlying processes are not visible to clients, I think clients see the benefit of having their provider using leading technology. A modern platform that scales to meet the future needs of our clients should provide confidence that the same level of validation is applied for new investments as well as existing assets. Canoe allows us to do this through its shared intelligence and fund master database. This is just one example of how technology allows us to be agile and adapt to changing client requirements.

We also see great potential for capturing additional data from unstructured documents. Clients are always looking for an information edge and Canoe’s extraction capabilities will allow them to mine documents comprehensively and leverage that information in their investment process.