In 2018, wealth-tech firm InvestSuite established a Scandinavian hub in Copenhagen to position itself as a provider of automated investment solutions to nearby asset managers, financial institutions and pension funds.
InvestSuite is a B2B-focussed company and its management team consists of former bank and asset management executives alongside data scientists and designers that have developed four flagship products. These products are cloud-based modular white label solutions that digest traditional financial data and then present the options in an easily digestible format designed to appeal to ordinary pension savers and retail investors.
InvestSuite has onboarded two Danish pension funds as clients: One for its storyteller product and another one for its portfolio optimizer. Now, the company is increasing its efforts in Scandinavia to grow its regional client base, according to InvestSuite's CEO and co-founder Bart Vanhaeren.
The company is experiencing an increasing inbound demand from institutions, and plans to increase its Nordic marketing efforts in the fourth quarter of 2021 and in 2022. This includes hiring a dedicated salesperson for the Nordic region.
According to Vanhaeren, the reasoning behind increasing the firm's focus in Scandinavia is that he believes its product range will gain more traction now that the products have a longer track record than they did when the newly established company joined the fintech community in Copenhagen three years ago.
We already have one Danish pension fund client using our optimizer for its equity portfolio, and we're getting more traction for the product in the region.
Lockdown caused setbacks
As the CEO used to travel to the Danish hub on a monthly basis, Covid-19 hit the company's growth ambitions in the region particularly hard, even though it might seem counterintuitive that a fully digital company experienced a significant setback because physical meetings became impossible.
"We did a number of presentations for several Scandinavian players before the pandemic, and we have a lot of direct connections with many financial firms in the region, so we hope to pick up from where we left off. I hope that we can pick up our discussions with some of the regional big banks in 2022," Vanhaeren says, and adds:
"Our storyteller and portfolio optimizer products are doing really well, and they are super cool products that fit the Scandinavian spirit of transparency and openness."
One of the key products targeting the Nordics is the portfolio optimizer. In short, the product is a customizable portfolio construction technology, which leverages an inhouse developed risk measure called InvestSuite VaR (iVaR) and which can be applied to existing investment strategies with the aim of reducing drawdowns during bear markets.
iVaR seeks to measure the size of a loss and how long it will take to recover losses.
According to InvestSuite's Chief Sales Officer Jonathan Gane, many investors – even professional ones - tend to forget simple math after periods of strong market runs.
"If a portfolio loses 50 percent of its value, the investor needs make a 100 percent return simply to get back at the same level," explains Gane, who who sold to hedge funds at French major bank Société Générale and built portfolios of alternative strategies at Fort Rock Asset Management for more than a decade.
When the market experiences periods of positive momentum, a market portfolio will outperform, but the intention is to bring peace of mind to investors when Mr. Market gets nervous.
"When you go to bed at night, you don't think about your portfolio in terms of volatility or mean variance. I come from that background, and I think about terms such as "how much is it going to lose", how much time will it take to get it back to same size as before, and how often will this happen to my portfolio. This is how most investors think about risk whether you're a retail player or, really critically here, a pension fund, because if you look at the objectives on both ends of the spectrum, they want to achieve the same thing," Gane says, and continues:
"We already have one Danish pension fund client using our optimizer for its equity portfolio, and we're getting more traction for the product in the region," he says.
The Danish pension fund has used the portfolio optimizer since May 2020 for its internally managed Danish and European equity portfolios. A spokesperson for the fund told AMWatch that the optimizer has worked as intended, although it is still too early to make an on-the-record assessment.
"We are pushing the product with asset managers now and we have a few proposals for asset managers in the Nordics to help them manage their internal portfolios as well. Same concept. If you can control drawdown, then you can allow a portfolio to compound at a higher rate because the sooner it gets into positive territory the better," Gane explains.
In the US, more and more investors are moving away from funds and ETFs towards direct indexing. It is often cheaper and more customizable, which can be useful to implement specific ESG preferences.
Direct indexing and crypto assets
InvestSuite describes itself as a highly innovative corporation and is engaging with two of the biggest trends within money management: crypto assets and direct indexing.
Last year, InvestSuite launched a crypto robo advisor called OSOM crypto autopilot alongside a company called Polybius. The trading robot uses InvestSuite's portfolio optimizer technology to assemble a fully automated portfolio of cryptocurrency assets.
"Banks, private banks and especially challenger banks are looking to increase their crypto offering, but they don't know how. We have the portfolio construction knowledge, and OSOM has the crypto insight, and together we provide an interesting product," Vanhaeren, the CEO says.
There are now more than 6,000 different cryptocurrencies compared to just a handful of options available in 2013, according to statistics site Statista.
In recent years, big institutional investors have co-created indices alongside asset managers and then made seed investments in them. Now, InvestSuite wants to a broader part of the market to gain these solutions, and believes its portfolio optimizer will gain traction, as direct indexing captures interest.
"In the US, more and more investors are moving away from funds and ETFs towards direct indexing. It is often cheaper and more customizable, which can be useful to implement specific ESG preferences. The historical advantages of funds are becoming smaller as transaction costs decrease and portfolio management systems become more efficient," says Emmanuel Wildiers, Head of Investment Research.
InvestSuite's headquarters are in Leuven, Belgium and aside from its hub in Copenhagen, the company has a presence in London, Sydney, Warsaw, Madrid and Amsterdam.
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