Release 24.04 - Alternative Investments
Ability to model inverted J-curve
Relevant for secondary fund-of-fund mainly as fund manager buys at discount. This functionality allows investors in illiquid alternative assets to refine their forecasts for strategy specific cashflow and interim performance patterns.
For many investors an important use case is mitigating their portfolio of primary funds’ J-curve and the associated accounting losses through adding secondary funds-of-funds.
The J-curve relates to the pattern the average fund shows from its investors’ perspective when it posts negative returns in its initial years and then its returns increase as the fund matures. The negative returns notably result from a fund’s underperforming and failing assets that are written off in their early days before the outperformers make their impact. Secondary buys, if at a discount, typically show an inverted J-curve, first showing a high internal rate of return (IRR) that, however, over time comes down again.
The functionality is not confined to secondary funds-of-funds but can be applied other strategies as well. For illustration, a VC fund’s typically more pronounced J-Curve is caused by the high number of initial write-offs; effectively, the fund managers are buying the portfolio at a premium to the assets’ fair value. This premium can now be set in the model.
Benefits
- Increases the investment coverage in ASTRA.
- Gives users a more accurate view on their future portfolio’s value creation development.
- Combining funds with different strategies helps users in constructing portfolios with targeted cashflow and valuation development characteristics.
- Enhances deterministic and stochastic forecasting models to handle fund manager value added through systematic discounts / premiums.
Subscription based licensing
Alternatives Strategy Analysis
Sales module dependency
Alternative Investments Manager
Cash-flow Forecasting for Illiquid Alternative Investment Funds
Modelling Divestment plan for secondary sells
With this new functionality the user can simulate and assess the impact of selling a share in a fund that is currently in the portfolio at a given future date and price.
Benefits
- Ability to model the impact of a secondary sell on the investment strategy.
- Increased front office analytical capabilities to assess ‘what-if’
The Portfolio Strategy now supports adding a Divestment Plan. Users can ‘click' together several positions to be sold and specify date, share of commitment (between 0% and 100%) sold and amount that would be received. Subsequent forecasts are based on the new commitment (old commitment - draft commitment) and hence reduced proportionally based on the draft commitment.
Subscription based licensing
Alternatives Strategy Analysis
Sales module dependency
Alternative Investments Manager
Cash-flow Forecasting for Illiquid Alternative Investment FundsRelease
24.01 - Alternative Investments
Private debt enhancement
Streamline operation for a decrease of commitment with no participation from the user.
When the global commitment amount for your loan facility decreases on a contract, you can choose not to participate in this decrease.
In this case, you can create events and transactions that ensure your non-participation, so that while the global commitment amount decreases, your participation rate in the global commitment increases proportionally to your existing positions, and your commitment remains unchanged.
Benefits
- Full automation of the process
- Easy to integrate with third parties’ information
- Remove heavy workaround
Process Decrease commitment with no participation
Subscription based licensing
Development partnerships
Sales module dependency
Private Debt
Dev.Partner: Private Debt - Phase I
Enhanced document processing for alternative fund decomposition
With this enhancement, you can import alternative investment performance reports and automatically create schedules of investments in a seamless end-to-end workflow that uses artificial intelligence to extract data and create Decomposition events in the Alternative Investments Manager.
Benefits
- Automated extraction of decomposition events from Schedule of Investments for Alternative Funds
Decomposition event extracted from Schedule of Investments
Subscription based licensing
N/A
Sales module dependency
Intelligent Document Processing
Peer Group Benchmarking
Evaluate the performance of close ended private market funds with peer group benchmarking. Benchmark individual funds or a group funds in the same vintage to pre-defined private market benchmarks.
A ranking is provided based on the quartiles and optionally top 5% and bottom 5% performers of the benchmark. Furthermore, it is possible to drill down and compare e.g., IRR of a specific fund to the IRR quartiles of the benchmark to assess if the fund is close to fall into the quartile above or below.
Benchmarking is available for IRR, TVPI, DPI and direct alpha.
The solution is provider agnostic and supports private market benchmarks from Preqin, Cambridge Associates, Burgiss etc. and enables the use of benchmarks from several providers simultaneously.
Benefits
- Enable provider agnostic peer group benchmarking
- Optimize workflows by having standard performance analytics, public market benchmarking and private market benchmarking the same place
- Enable flexible definitions of rankings including top 5% and/or bottom5% performers
Rankings for IRR and TVPI are shown based on the Private Capital – All benchmark for a portfolio of funds.
The TVPI per vintage for a portfolio of funds is shown next to the 25th, 50th and 75th percentile from the Private Capital – All benchmark. For e.g., the 2012-vintage, we can see that we are in 2nd quartile but close to being in the 3rd quartile.
Subscription based licensing
Alternative Investments Manager
Sales module dependency
N/A
Stress scenarios for illiquid alternative fund cashflows
Investments in illiquid alternative assets are long-term oriented. To deal with unexpected developments, investment managers need to assess what happens if certain scenarios materialize. Stress scenarios are an indispensable part of portfolio management to test the effects of changing conditions on the portfolio’s behavior. For the alternative investment funds such changing mainly manifest in changes of cashflow patterns which can now be assessed within the Alternatives Strategy module.
Benefits
- Enables users to assess how a portfolio of funds will respond to future changes in market conditions and to identify factors that imperil the investment strategy’s success.
- Enables users to produce more robust forecasts as stress scenarios can reflect a wider variation of possible futures and situations that have not necessarily occurred in the past.
- Allows users to flexibly combine several types of cashflow-related stresses like, for illustration, the acceleration of capital calls plus a delay of repayments plus an extension of fund lifetimes and define the groups of funds to which these combined stresses can be applied.
The Alternatives Strategy module allows users to generate liquidity and capital risk related KPIs, such as a portfolio’s Cashflow-at-Risk (i.e., the net of contributions and distributions) and how it develops over time:
Applying a stress scenario that assumes an acceleration of contributions results in a situation where an investor needs to pay out money earlier than expected and, as several contributions are compressed within a shorter time frame, also result in higher aggregate amounts that are called:
The Alternatives Strategy module allows users to look at this in more detail, separately for contributions and distributions and also assess the impact on the portfolio’s overall valuation:
This image shows a combination of various stresses: an accelerated contribution schedule where investors have to provide funding quicker than usual. Consistent with a stressed market environment are longer lifetime for funds as fund managers attempt to ‘ride out’ crises and wait for a better exit environment for their portfolio companies. Therefore also delayed realizations are part of this stress scenario. Consistent with these cashflow patterns is a portfolio valuation that achieves its peak significantly later:
Subscription based licensing
Alternatives Strategy Analysis
Sales module dependency
Alternative Investments Manager
Cash-flow Forecasting for Illiquid Alternative Investment Funds
Release 23.10 - Alternative Investments
Private debt
Streamline operation for an increase of commitment with no participation from the client.
When the global commitment amount for your loan facility increases on a contract, you can choose not to participate in this increase.
In this case, you can create events and transactions that ensure your non-participation, so that while the global commitment amount increases, your participation rate in the global commitment decreases proportionally to your existing positions, and your commitment remains unchanged.
Benefits
- Full automation of the process
- Easy to integrate with third parties’ information
- Remove heavy workaround
Subscription based licensing
Development partnerships
Sales module dependency
Private Debt
Dev.Partner: Private Debt - Phase I
Auxiliary Job type for reconciliation of payment details on transactions created through the Intelligent Document Processing workflow
Build trust in the machine-learning-powered processing of private market transaction notices, by adding a reconciliation check for the payment details.
You can now automatically ensure alignment between payment details provided by fund managers/GPs on transaction notices with settlement defaults stored in SimCorp Dimension. This new auxiliary job type allows you to trigger such a check in your transaction STP workflow.
Users will be alerted to transactions with discrepancies for further investigation. Thereby, you can rest assured that reconciled transactions have the correct payment details for further processing (e.g., SWIFT message generation).
Benefits
- Ensure accuracy of payment details
- Increase STP rate for Alternatives transactions
- Prevent fraud and manual errors in payments processing
- Focus your back office users’ attention on exceptions
Subscription based licensing
Alternative Investments Manager
Sales module dependency
Intelligent Document Processing for Alternative Fund Transactions
Alternative Investments Manager
Release 23.07 - Alternative Investments
Colmore Integration – level 2 & 3
The Colmore level 2 & 3 integration enables automated creation of schedule of investments from fund performance reports (e.g. quarterly reports). This includes easy creation of new portfolio companies. For the portfolio companies, the solution also includes import of financial KPIs such as EBITDA.
The solution leverages SimCorp’s partnership with Colmore, a leading service provider in the private market space. The portfolio company and schedule of investment-data is retrieved from Colmore using dedicated APIs. The raw data is stored in SimCorp Dimension. Inside the Alternative Investment Manager, the status of the retrieval and import process can be monitored. Easy steps can be taken to resolve potential issues such as matching the fund between Colmore and SimCorp Dimension, when identifiers don’t match upfront.
Benefits:
- Enable automated import of schedule of investments including creation of portfolio company data
- Enable automated import of financial KPIs for portfolio companies
- Optimize workflows with overview of needed user interaction and easy steps to resolve potential issues
The schedule of investments is imported from the Colmore level 2-data and stored as a decomposition event in SimCorp Dimension. Portfolio companies are created with key information such as name, currency, geography and GICS-classification.
Subscription based licensing
Pilot
Sales module dependency
Alternative Investments Manager, Alternatives Fund Decomposition and Look-through
