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What was behind your original concept for PerTrac?
I?d like to tell you that PerTrac was the result of a brilliantly conceived plan to build and deliver a revolutionary new analytical platform to the investment management industry. But actually, the whole thing is a fluke of circumstances that could never be repeated and we did not initially intend to be in the software business.
My partner, Milt Baehr, was one of the early pioneers in the mini-computer field. After graduating from Case Institute of Technology, he became one of the original members of Data General Corp. team where he was involved in the creation of a variety of mini-computer-based solutions for both business and scientific applications. After retiring at an early age, he began to follow a passion to apply technology to the financial world by building computerized trading systems and option pricing models.
Meanwhile, I grew up in the brokerage business where I served as investment consultant to institutions and high-net-worth individuals. Although involved primarily with traditional investments, it was my good fortune to be introduced to alternative investments in the early 1980s. I ultimately left the brokerage business to become a principal and responsible for marketing in a small CTA. Assets grew quickly and performance was good. And by the early 1990s, my personal investment portfolio had become highly concentrated in our own strategy and I realized that I needed to begin diversifying with other managers.
This is where Milt and I came together. We were both allocating our personal assets to managers, but needed better tools to help analyze manager performance and build our portfolios. Frustrated with the limitations and shortcomings of currently available software, we decided to combine our experience to build a platform for our own personal investment decision process. While Milt was hard at work building the first generation model, I was gathering ideas from industry friends and institutional investors around the world. I brought the best ideas for features and capabilities back to Milt who then incorporated them into our platform.
At this point, we still had no thoughts of making our tools available to other investors. However, it didn?t take long before some of those whose ideas we had plagiarized began to be curious about our developments activities. A few even inquired about the possibility of purchasing our tools for use within their own organizations. Somewhat reluctantly, in 1996 we decided to form a separate company, Strategic Financial Solutions, LLC, to distribute the platform as a commercial product. Thus, the PerTrac Desktop Analytical Platform was born.
What makes PerTrac so appealing?
I must admit that there isn?t very much PerTrac does that one cannot do with a combination of Microsoft Excel, Access and an optimization program?..if you just had enough time! PerTrac saves investors the time and trouble extracting data, switching between software programs, entering complex formulas, checking and rechecking calculations, and formatting charts and graphs. In the final analysis, it is this speed and efficiency that attract people to PerTrac. Furthermore, building and maintaining internal systems that attempt to replicate PerTrac's functionality is extremely expensive when compared to the modest cost of PerTrac.
Our objective is to provide a comprehensive, yet easy-to-use platform that fulfills all the requirements of serious investors. Functionality includes manager search and selection resources, a full array of statistical analysis, plus robust asset allocation and optimization capabilities. Additionally, our advanced features include a higher level of peer-group analysis, return based style analysis and Monte Carlo simulation for portfolio stress testing.
Another benefit that PerTrac users enjoy is the ability to access a wide variety of both traditional and alternative databases. It seems that most data vendors offer some basic level of analytical capability as part of their package. The problem is that the analytic functions are relatively limited. More troublesome is these functions can only be used with that specific database. Since we are not in the database business, our users can easily access multiple databases and conduct all of their analytical needs in one common environment.
Then when the analysis is complete, everyone needs to prepare printed reports for both internal decision making and external marketing. PerTrac provides powerful and flexible publishing tools to make report generation quick and effortless.
Last, but perhaps most important, PerTrac users have unlimited access to our talented professionals. We?re not just a bunch of programmers who have never managed money. Each staff member has both the technical skills to address technology issues as well as extensive experience and credentials in the investment management world. This allows us to work with our clients to design creative ways to use the tools we offer and insures that our clients receive maximum value for the money they spend on PerTrac.
Who uses PerTrac today?
It is our privilege to serve over 1,250 organizations in 42 countries. On the investor side, our client base covers a wide range of investment professionals including banks, brokerage firms, consultants, fund of hedge funds, endowments, foundations and family offices. We also provide a number of tools to assist investment managers with their marketing activities. In many cases, when you see a performance report from a manager, it was either generated with PerTrac or fashioned to look like it was. In fact, ?PerTrac Report? has become synonymous with performance report, much like Xerox with copier.
It is true that we have a particularly strong presence in the alternative investment community. This stems from the fact that Milt and I each have over 25 years of experience in this arena. However, our tools are not specific to hedge fund investing and many of our clients use PerTrac to select managers and build portfolios using only traditional investments. We have worked hard over the past 18 months to make sure our traditional clients have a variety of databases that are compatible with the PerTrac Desktop Analytic Platform. In addition, our latest release included enhanced functionality for traditional investors.
What does the future hold for PerTrac?
We?re not consultants, we don?t provide third party marketing services for managers or funds and we?re not a database?.instead, our objective is very focused. We will continue to work hard to stay on the leading edge of investment technology. Of course, we have a few of our own ideas. But, the best innovations come from the combined wisdom and experience represented by the broad base of clients we serve. We just released a new version chock full of exciting new functionality. Some of our newest features include a wealth and retirement planning module, more sophisticated peer group search capabilities and enhanced asset allocation and style analysis modules. Meanwhile, we are working to rewrite the entire program in the newest language designed to take advantage of the latest in computing technology. Our clients can expect to see a new version released every 6 months on average.
What does the future hold for the hedge fund industry?
While it?s impossible to predict the future of the hedge fund industry with any degree of certainty, we have witnessed a number of trends that we think will continue to evolve over the next several years. First of all, there has been a fair amount of consolidation over the past 18 months. But it has been more than offset by new firms entering the market,
both on the part of fund of hedge funds and single manager funds. We?ve also noted a number of new types of investors coming into the hedge fund arena. More and more, the clients and prospects we talk to are investigating hedge funds for the first time. At a recent conference, a pension fund prospect we talked to had this to say: ?We?re not in hedge funds yet, but we will be. We know it?s the only place to make any money.? We hear this sentiment echoed repeatedly.
Another trend is that investors are getting more ?hands on? with their investments. In the past, many institutional investors were content to let their consultants have almost complete discretion over a portfolio. With advances in analytic technology and widespread access to data, we see more and more investors that want to buy an analytic platform to validate their consultant?s recommendations. In fact, institutional investors are in general becoming more savvy, and we believe this is in large part due to access to technology like PerTrac and the improved availability of data and news.
Website: www.pertrac.com
