Taking the Long View

July 19, 2019
Jack Lynch, Head of Strategy
 min read

Ridgeline is bringing modern enterprise software to the investment management industry.

Our story would be straightforward had we started with that premise, but in reality, we built our leadership team before we knew exactly which industry we’d pursue. This may be atypical, but it’s the playbook our founder Dave Duffield has used across a storied career — get the right people on board and they’ll find and address a big problem.

As our team developed and stress-tested ideas, respected associates at an investment management firm urged us to take a look at the software landscape for their industry. What we observed was an opportunity to bring our expertise in enterprise platforms to a specific domain. So we started chasing down meetings and asking questions.

We’ve had conversations with all manner of firms across many functions. A clear theme emerged: this is a mission-driven industry. Firms are dedicated to the success of their clients. People are the differentiator. And yet, for too many firms, updating accounting systems with the day’s trades requires three applications, two blotters, and the “spinny wheel of death”. If an institution wants to liquidate assets, the firm plays telephone tag with a custodian, wades through multiple authorization forms, and coordinates rebalancing over the phone, sticky notes and email. Put simply, serving investors with today’s technology is difficult.

There’s more. In addition to conversations with firms and industry experts, we studied the industry ourselves. A few obvious patterns began to emerge:

  • Fee compression and shrinking margins are creating pressure on firms’ core businesses and forcing scrutiny around operational costs.
  • An uncertain regulatory environment has made staying in compliance difficult and expensive.
  • Legacy systems and old technology are costly and have created barriers that limit scale, efficiency, and insight.

In response to this change, firms are competing on fees, chasing outsized returns, and consolidating in order to achieve new economies of scale. So while the rise of passive management (fueled by low interest rates) is forcing firms to become more lean, loosely integrated, piecemeal software is weighing them down.

For Ridgeline, this feels like a calling. That investment managers are chasing efficiency resonates with us because, well, that’s a primary value proposition for enterprise software. It did, however, beg the question: If we want to eventually serve the entire industry, where do we take the first bite? While wealth managers are likely to be outsourcing their back office, many asset managers were keeping these functions in house. In fact, we noticed back-office efficiency has an impact on a firm’s expense ratios, which in turn impacts the return a firm can offer to clients. Helping money managers compete to better serve investors is a mission worth building a company around. That’s our starting point: asset management. But our success is contingent on partnering with the industry. We’re setting out to build collaboratively from day one, working directly with firms to gather product requirements and inform our roadmap. Our customers’ goals will be our own.

So, what are we building? We’re starting with core systems. Specifically, portfolio accounting (a firm’s data backbone) and trade order management. We’re confident a modern platform requires a truly modern foundation. Soon after, we’ll add breadth across the front, middle, and back offices. Our applications will be unified from day one; they will be designed to work together, built on an enterprise-grade security architecture, with a common data model and will lay the groundwork for universal workflow and automation. Ultimately, we’re building an end-to-end platform that firms will use to deepen relationships with investors while reducing the effort required to serve them.

Ridgeline is betting on people and partnership just as much as technology. We’re taking the long view. And we’re deeply motivated by what we see.

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