The Trouble with Trillions: Many Advisers, No Tech

  • Karl
  • By Karl Antle, ValueStream Labs   |   July 29, 2015

One of the things we find most interesting about Financial Services is the sheer number of "niche markets" that exist. However, when compared to other industries, the word niche seems misleading…after all these highly-specialized segments of Financial Services can represent trillions of dollars flowing between parties, billions of dollars in revenues, and unrevealed investment opportunities.

Traditionally, these highly specialized markets have been served by a cadre of folks in professional services, including consultants, bankers, lawyers, and traders. If you believe that there is a fundamental shift occurring on Wall Street in how research and analysis is conducted (like we do) then this creates tremendous opportunity to launch specialized products and platforms, that each have a sizeable opportunity to go after. 

This is why we are excited to announce our latest investment into Syndicated Loan Direct, a transaction research platform for the syndicated loan market. For those of you who are unfamiliar, syndicated loans are a $3 trillion market, and almost all of it is bespoke, consisting of individual deals structured by leveraged finance groups of investment banks, and invested in by a wide range of hedge funds, private equity funds, mutual funds, and CLOs. The SLD team is led by Shaheen Malik, a former Leveraged Finance banker turned entrepreneur, who intuitively understands the pain points of this market, as well as the sensitivities of working inside large financial institutions.

Anyone in credit knows that analyzing a deal is about more than just looking at coupon rates. A significant edge is gained by understanding how the deal is legally structured­, so you can recognize the risks to expected cash flows changing over time. This is why legal analysis is so inextricably intertwined with credit analysis. Currently, members of the syndicated loan market spend countless hours manually analyzing legal documents to understand how a deal works. More time spent reviewing documents means higher costs and fewer opportunities that can be evaluated.

This is where the Syndicated Loan Direct team enters the picture – Shaheen and her team of highly specialized transaction lawyers convert deals from long prose documents to a structured database of terms, which can easily be searched, and compared across deals and participants. This allows users to quickly and easily understand the risks inherent in a particular deal and how it compares to other deals in the market.

Syndicated Loan Direct combines many of our favorite themes in FinTech: specialized knowledge tackling a big market, use of technology to allow humans to focus on what they do best, and a dataset that becomes more valuable for everyone in the community as more firms contribute to it – both on the buy side and the sell side.

We look forward to working with the Syndicated Loan Direct team and growing a very important part of the financial market infrastructure. Together, we hope to make this trillion dollar "niche market" a lucrative niche for software too.


Karl
 

Managing Partner at ValueStream Labs

 
Karl has significant experience advising and launching innovative financial services companies and projects across the US, Europe, the Middle East, and East Asia, most recently as a senior member of Oliver Wyman’s Financial Services and Private Equity groups.