BondIT – Masters of the Bond Universe

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Company profile: BondIT

Credit Rating. Maturity Date. Coupon Rate. Face Value. Par Value. Government Bonds. Bills. Notes. Bonds. Municipal Bonds. Corporate Bonds. This is barely touching the surface of the entire Fixed Income verbiage. Fixed Income investing is a core and an essential element of portfolio management but has long been complex and deeply analytical to come to grips with. BondIT, an easy-to-use SaaS platform can help you construct a bond portfolio in as little as ninety-seconds. With a clearly defined target market BondIT is acting as an enabler in the sphere of bond investing.

In operation now for 2 years, founded in 2012, BondIT currently has 25 employees, is based out of Tel Aviv and can be found under BondIT. Their typical clients are Private Banks, Investment Managers and Corporate Treasury departments.

The Business

BondIT is B2B oriented, empowering financial advisers with machine learning, algorithmic data-driven recommendations. They collect and processes information about different fixed income instruments and encapsulate the financial data in the propriety machine-learning algorithms within the work-flows of fixed income advisory to assist in creating and managing bond portfolios. Fixed Income instruments are inherently complex in nature, the essence of BondIT’s platform is derived from machine learning portfolio optimisation with actionable analytics, algorithmic recommendations for buying, selling and replacing bonds in the portfolio.

The Engine

Imagine this, couple of hundred thousand bonds from different geographies and multiple currencies, all in one place, with prices scrubbed, bond risk ratings and weights defined, liquidity addressed at a bond level, yield management and ability to change exposure based on risk preferences – all taken care of within minutes without even opening Excel. No need for imagination, the reality is, BondIT, does all of this and much more. Their proprietary technology analyses fixed income instruments in detail, allowing for flexible yet constraint based portfolios. The beauty of BondIT’s platform (after seeing it in action) is that it captures a Risk Manager’s imagination, but astutely more like nightmare scenarios. BondIT uses machine learning as a cornerstone for its products and platform.

Their client segment is very well defined. with a product like this, it won’t be difficult to lose the plot. BondIT has maintained a clear focus – Private Banks, Institutional Wealth Managers, Investment Managers and Treasurers.

The revenue model is based on monthly subscription per seat.

The Intrinsic Value

If you have ever been to a tailor, you will know, the tailor will typically take a couple of handful of measurements and based on that they will cut the fabric for the style-size-(physical) design, do a trial with the customer and hand over the final product with underlying margins for any future changes. It is quite complex and is an art as each tailoring assignment is unique. BondIT is your tailor for creating an active (yet passive) fixed income portfolio. The value that their platform provides is not unique to the system, there is nothing intrinsically valuable about it. BondIT is the value and their platform could be the future system. The system can help you create and maintain a bond portfolio just based on liquidity of bonds and alert and rebalance by adding/substituting the underlying lines of stock based on pre-defined parameters from a list of bonds available globally.

BondIT is competing against Excel models. They are aiming to turn fixed income investing on its head. Their first wave global target market is already engaged. They are bringing fixed income investing to the mainstream. They are innovating in access to data, aiding by analysing the instruments and their characteristics by upgrading the investment philosophy whilst actively displacing portfolio with relevant lines of fixed income stocks.

The Profitability Conundrum

BondIT is in investment phase. The product and platform is in test phase for some customers but they also have several paying customers – in total as many as thirty-five institutions globally. They are optimally positioned for profitability.

The Verdict

Ethical investing – MiFID II, BondIT is here to solve the problems surrounding transparency, liquidity and providing information on the finger tips. BondIT is engaged and solving in a very inefficient process. The idea that you can get away from Excel yield curves is exciting enough for some. BondIT has Valuation, Fixed income brokerage, Machine learning, Algorithm research, Quantitative risk just as some of the skills amongst its team helping its client’s test the product and bringing it to life.

Garbage-in-garbage-out is often associated when trying to perform a true assessment of a bond portfolio. They solve just the problem associated with the flow of information. They are not experimenting with the information that is out there on the fixed income instruments, they are creating insights and testing it with their prospective customers. There is clarity in the strategy (for example, they are staying clear of the bond issuance space, as their algorithm is based on market data) and the focus is on creating machine learning based on experience and real life live scenarios.

They are battling through existing infrastructures, testing and working with power houses of the industry, collecting information and generating insights, which is power – are they becoming a master of the Bonds universe? This could be the long awaited bond investing tool in the marketplace.

Founder comments

Wealth management and financial advisory space is undergoing an automated advice and digital transformation revolution. We are seeing increased demand every week, for solutions that streamline fragmented processes while supplying smart recommendations in an efficient and timely manner. This quiet revolution in the largest market in the world, consists of shifting from OTC to exchange based trading, creating unprecedented opportunities for data analysis. This is the best time for a change in this space.

BondIT is a pioneer in harnessing machine learning and data analytics methods for fixed income portfolio management.  Our goal is to empower the tech-neglected financial advisory arm (relationship managers, investor advisor etc.) with a data driven solution, driving up sales, improving efficiency and reducing friction between credit desk, investment managers and relationship managers, and most importantly, completely transforming end customer’s experience by delivering a personalised, customised smart solution. By doing that we create a triple-win situation for the investors, the advisors and the companies employing them.

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.

Feature image: https://stocksnap.io