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FundApps – Creating Fintech Regtech Disruption

Company profile: FundApps

Risk Compliance Regulation was never a leadership career path. 2008 financial crisis changed all that. Regtech is now leading change. FundApps, a regtech company, is quietly doing just that. Bringing transformation, by embedding itself in the value chain. A small company with a talented team and a solid technological engine.

Founded in 2010, Founder: Andrew Patrick White, Number of employees: 20, Client profile: Asset managers, Location: London & www.fundapps.co

The Business

FundApps has a cloud-based offering focused towards automation of compliance monitoring for the asset management industry. The flagship offering includes shareholding disclosure reporting, sourcing regulatory data which covers 86 jurisdictions and is pushed to the users. The platform also covers investment restriction monitoring for funds and specific reporting and compliance rules i.e. monitoring issuer, counterparty, leverage and other investment restrictions, including prospectus and UCITS rules.

Asset Management End-to-EndThe Engine

FundApps could be a partner to any fund manager’s compliance and legal team. They have a cloud based offering and regulatory changes are pushed to the users. The platform also maintains audit trail of the changes to the rules and compliance workflows. Their content provider is aosphere, an affiliate of Allen & Overy. The content is essentially regulation in 86 jurisdictions (400 rules) and regulatory data. The platform has the ability to take the input on parameters such as asset allocation limits, prospectus/mandate rules either fund or investor specific. FundApps engine combs’ regulatory requirements of a fund along with internal compliance, asset allocation strategies, fund mandates all on a singular offering and sends alerts on any breaches or violations.

FundApps currently watches a trillion-dollar in assets. Their main clients are asset managers. According to FundApps “We have numerous clients in the top 10 assets under administration for traditional asset managers and hedge funds in Europe and North America. Our clients are normally in those two buckets – globally focused asset managers, hedge funds and traditional asset managers (pension and mutual funds).”

The revenue model is not based on system usage or number of licenses, instead mostly based off of a clients assets under management.

The Intrinsic Value

End-to-end view of the asset management industry demonstrates this is an important ingredient of the industry. Long (and even now) it has been an internalised function with interpretations sought from lawyers and compliance experts. FundApps clearly has a niche and a big one.

Competition is not tech savvy. It has been an internalised function within the industry with flow of information dependent on as and when the information finds its way and is analysed. FundApps is displacing an archaic process. FundApps cloud based platform pushes the information and alerts based on pre-defined parameters and gives experts a chance to provide true analysis as opposed to sourcing-reading-analysing.

Fintech companies in this space are limited. FundApps clearly has a head start. The coverage of 86 jurisdictions, partnership with a content provider, integration of fund rules into the engine and ever-growing client base – makes FundApps an attractive proposition.

The Profitability Conundrum

Company declined to provide the details on financials but commented they have been profitable since the first client. They are bootstrapped and fully employee owned. They are watching a trillion-dollar in assets, with 20 employees, London real estate, supplier and technology running costs – you can do the math. There is more to come from FundApps.

The Verdict

FundApps conveyed, they are capturing amazing talent. Given the automation and regulatory coverage of their products, if the customer experience stacks up, they have an extremely sticky model and competition will find it tough to break into this client segment.

One piece of news will not shape the future of the industry but worth noticing – Deloitte launching regulatory service for asset manager – there are two aspects of FundApps business model that raise question in general and on the back of this news, firstly, the partnership model with an affiliate of law firm. How nimble can FundApps be if they face supplier challenges? Secondly, what is the next set of client base they want or are developing? The model is replicable but being first to the market may just play to their advantage.

When it comes to placement in the value chain they are impeccably displacing inefficiency. FundApps concept has the ability to embed itself in many systemically critical processes. FundApps is in a true sense disruptive to the inefficient industry segment.

Andrew Patrick White – Founder / CEO comments:

RegTech presents a gigantic challenge and opportunity for the industry.

Modern technology (SaaS) is uniquely adept at providing a higher level of compliance and the ability to reduce risk; much more so than the previous options available to the industry. We have seen multiple clients join our service and leave behind clunky spreadsheets or not-for-purpose software after unintentionally exposing themselves to regulatory sanctions.

RegTech’s future is a challenge because it represents change and the financial services industry isn’t an early adopter by any means. We believe we are dragging the financial software industry kicking and screaming out of the stone age – we do this because we understand there is no better way for an asset manager to stay compliant in the current regulatory climate.

Disclaimer: This material is for informational purposes only and should not be construed as research or as investment advice, nor should it be considered information sufficient upon which to base an investment decision.  Further, this communication should not be deemed as a recommendation to invest or not to invest.

The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete in its accuracy and cannot be guaranteed.

Featured image: https://stocksnap.io; Logo: www.FundApps.co