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“A standardised approach that can sometimes be biased towards household name bulge-bracket managers was especially lacking for emerging managers, and/or more esoteric strategies, which demand different prisms of scrutiny, in the context of the organisation, strategy, and asset class,” he adds.
Flexible pricing and cost sharing Other providers’ pricing levels were too high and fee structures too inflexible for some allocators. A hefty fixed subscription fee with additional fees for plugging gaps in coverage does not align well with allocators adopting a dynamic and flexible approach to researching new strategies, managers and funds. Fixed fees running into six figures quickly exceed seven figures if coverage is patchy. In contrast, perfORM does not charge a fixed retainer, and there is no minimum commitment, although there can be some bulk-buying savings for large volumes of reports. perfORM believe that their fees for a full scope ODD report are competitive, however allocator clients can benefit from discounted re-sale reports.
Swifter delivery Long lead times of six months or more for fresh manager coverage can also result in allocators missing out on ephemeral investment opportunities, intermittent capacity windows for older funds, or early bird share classes for newer ones.
perfORM is geared to act faster, especially for ODD reports that are limited in scope covering, for example, the manager and not the fund.
“A very broad-brush guide to perfORM timeframes could be 6-8 weeks, but this may be reduced depending on the responsiveness of managers and service providers,” says Thom.
Avoiding potential conflicts Some ODD providers may face perceived and/or real conflicts of interest, including where they are effectively marking their own homework.
“Firms offering services such as regulatory hosting, compliance, fund audit, tax advice and governance can be conflicted because they are doing the things they are checking. The one thing that should be partitioned and segregated is ODD,” says Thom.
Even where the ODD provider is not acting for the firm it is reviewing, it might be (consciously or subconsciously) benchmarking operational routines and policies against its own practices, which could bias the analysis.
perfORM’s corporate parent since October 2021, JTC Group, provides a wide variety of fund, corporate
30 Quentin Thom, Co-Founder
and private client services. However, perfORM operates as a standalone boutique with no information synergies and is segregated from the rest of JTC Group.
Remote working with site visits if needed Remote working is one factor that reduces business costs, but it is also part of the desired business model.
“We were pandemic-proofed by accident. We opted for remote working as a professional choice based on how the team wanted to work in a decentralised way. However, as the team continues to grow some team members will opt for in-office arrangements and with JTC Group we have access to offices in many countries as we need it,” says Thom.
perfORM can, however, carry out site visits in certain situations e.g., if a client requests it, if a manager is reluctant to share information online, or if initial ODD reviews uncover an issue that requires on-site investigation. Reviews of smaller and recently established managers may also benefit from an office inspection, but in most cases adequate transparency can be obtained remotely.
“Larger managers have historically preferred on-site viewing of certain documents, but Covid greatly improved transparency in terms of online and database disclosures. One advantage of data room
access is that it is not time limited in the way that a site visit usually is,” says Thom.
Costs of on-site visits are agreed in advance and coordinated amongst multiple offices and clients to maximise efficiency and ensure that cost savings are passed on to clients.
Efficient automation Digitalisation can reduce costs and improve efficiency, with potential time savings of 20 to 30% across multiple reports.
“Word, Excel and email are not optimal, and they can impact the quality of reviews. We are using technology platforms to gather quantitative and qualitative information. We use technology in a smart way as an enabler, rather than being a tech- led solution. We do not “fintech” our detailed ODD process away,” explains Newman.
perfORM contemplated building proprietary data analytics but opted for a third-party solution. “In 2022 we onboarded the Diligend dedicated ODD platform. This helps to manage significant quantities of data and constructs online questionnaires in a smart way, with nested questions that prioritise what is applicable and reduce the need to write ‘non-applicable’ in irrelevant fields, also saving managers’ time,” says Newman.
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