Sanjay Vatsa – Chief Revenue Officer and Chairman, Inveniam Advisory Board
Sanjay has 25 years in senior “C” level global leadership positions at Citibank, BlackRock and Merrill Lynch. He has chaired industry committees at the Bond Market Association, the Asset Management Forum and the Securities Industry Association. Sanjay is a founding member of Global TIE Women, a group which fosters female entrepreneurship across the globe.
Q: What’s on your mind these days, Sanjay?
Sanjay: The question I am grappling with is, ‘How do you make alpha inclusive?’ Alpha is primarily generated in the private markets. What we are doing is building trust through transparency. We’re giving transparency on the underlying performance of a private asset on a regular basis with evergreen data at the time of use. That’s the point. We field the data to you so that you can do whatever you want – investor calculations, valuations, waterfall calculations – whatever you want to do. So that the information is fresh, and discoverable all the way down the source. That’s what we are doing. And because the transparency is available through Inveniam.io, the trust factor on the underlying value is built. You have better information to make better decisions.
Q: Talk about the tokenization of private market assets
Sanjay: If you look at global markets, the U.S. is the slowest right in terms of digitizing private market assets. But if you go internationally, the pace of private market assets becoming democratized and inclusive to all is becoming more and more familiar to people, and more and more in demand. The result is tokenization. What is tokenization? You take an asset and represent it in a digital form and you can inform what the value of that digital asset is. Then it allows people to actually trade it, put it on the balance sheet through mark-to-market. We’re providing regular mark-to-market for private market assets. That is what we do. And that is what causing transparency. If the trust is built, private markets will become even more available. We are the Refinitiv of private market data.
Q: What value does Inveniam to a fund administrator? What problem do we solve for fund administrators?
Sanjay: I think it’s not only the problem we are solving. We are making new revenue pools available to them. We are making the pie bigger. Because we are able to automate the aspects of private-equity middle office, fund administrators could be offering those services to their private equity clients and commercial real estate clients, which they could not do before. That’s number one. Number two, if you’re able to provide transparency on the underlying value of the asset, that in itself – those independent marks that fund administrators create – could actually help the fund’s general partners and limited partners in a significant manner because now there is clear alignment on the value of the underlying asset. And fund administrator can charge a fee for that.
So, I think these are two major components where there are two different revenue pools. One is for valuing assets on a regular basis. You’re taking an independent mark and valuing the assets. And the institutional client may be demanding those marks. The second aspect is that now because of the automation of waterfall, investor calculations – all those things which are a significant portion of what we are doing for the private-equity middle office, the fund administrators can go out and offer fund services for that.
Q: Is Inveniam solving a U.S. issue of is this a global phenomenon?
Sanjay: It’s a global issue. We are talking to a couple clients in the United Arab Emirates and they want us to value their malls.
Q: What’s the benefit to the client?
Sanjay: Capital release. How to unlock the trapped capital in your assets and make it available either to use it for yourself at your company or to make it available to investors so that they can participate in the alpha creation. Let’s say there’s a portfolio of a single asset. And they’re holding it at a depreciated value. Take a simple example of a commercial real estate office building. We can actually, because of the Inveniam.io platform, we can provide information that will allow that entity to hold that asset at mark-to-market. So, at a depreciated asset of let’s say ten dollars, we can mark it at it’s fair-market value of thirty dollars. Because we inform the value of that asset every month – it could be $28, it could be $31, it could be $29, it could be $33 – but the point is it’s greater than ten dollars or five dollars. Because we can do that, the opportunity that we have is we can allow that entity now to understand what they want to do with that asset because the assets have gone up and the liabilities are still low. They can issue additional debt, they can issue additional preference stocks; they can do a lot of stuff to actually bring capital into the marketplace and if they build capital to the entity, they can start using it in various ways – for working capital, reserve requirements, making acquisitions, for whatever they want to do.
Q: Talk about the manual processes being used at big organizations even today. Are big organizations sometimes trapped in the past?
Sanjay: Oh, yeah. The digital maturity of all these organizations varies. But they are mostly focused on the public markets, right? Public markets are only 75 trillion dollars. You can throw bodies at solving those problems, and get over the manual stuff. In my opinion, there is still a lot of work to be done to digitize public markets at large financial institutions.
But for private markets, which is five times bigger than public markets, and because there is lack of trust and transparency on the underlying assets, it cannot work the way public markets work. You need end-to-end automation. You need the aspect of trust to be built from blockchain. You need AI, where you can actually gather data in an automated manner. So that there’s less human intervention. If there’s less human intervention, the aspect of people trusting the output goes up significantly because it’s not manual. If you look at the public markets, it took 20-30 years for imperfect markets to become semi-perfect. On the private market side, there is no 30-40 years left. We need to make assets transparent as soon as possible. Hence, the inefficiencies of public markets, and how they operate, process and function, is not going to be applicable to the aspect of private markets.
I call it the “Humanology Factor”. There’s a lot more automation required when you have intelligent human beings helping to process a transaction. As opposed to human beings processing the transaction in private markets and human beings helping them along the way. It’s the reverse. It’s a flip syndrome. You need the technology like chain. Like the blockchain, or robotic process automation, or artificial intelligence to help bring trust in the data that is not maneuverable; that is not changeable; it’s trustable. It’s immutable to the end client so that they can believe in it. And a human only comes into contact with it when they’re trying to do a set up; or they’re trying to repair an issue. And that also becomes completely discoverable. And auditable. So, for making alpha inclusive for private markets, trust and transparency is very critical.
Q: How has the pace of change, or tempo, at Inveniam shifted since you began with the company?
Sanjay: We have evolved significantly in the past six months. We have polished off our valuation. We know the business proposition to the marketplace. We are firm believers of the value to the marketplace. Not only that, I think our clients are starting to believe that to quite an extent. We have created some use cases, like on the investor calculations, the valuation-as-a-service, like informing ESG with independent marks. We’ve created the use cases that resonate with the end client. At the end of the day, you’re not throwing technology to them. We are throwing use cases to them that can open up new revenue opportunities for them.