Investment companies learning from College applications?
Any parent or student who has recently gone through the college application process is intimately familiar with The Common App. The Common App is a standardized application that a student can use to apply to hundreds of public and private universities. The success of this initiative serves as a good case study for why investment companies should look to create efficiencies by standardizing repetitive activities – notably fulfillment of due diligence questionnaires, RFIs, and RFPs.
In 1975 a small group of private colleges with similar entrance requirements recognized that to apply to multiple colleges, prospective students needed to fill out extensive individual applications to make their case that they should invited to attend the school. Upon review, they discovered the vast majority of the information they were looking for was the same. They banded together and created a common form that students could fill out once, photocopy, and send in as an official application to each school. The goal of this effort was to fight against redundancy, simplify the tedious process of applying to colleges, and create equality amongst applicants. Today over 900 public and private universities accept the Common App, processing over 1 million applications per year.
Investment companies and professional fund investors face the same dilemma when exchanging due diligence information: fund companies must complete multiple due diligence questionnaires seeking largely the same information, for the same strategies, on a continuous cycle. This qualitative and quantitative information is the lifeblood that asset owners and fund investors need, and most of it is generally not available from any public database or company website. Over time the volume, complexity, and importance of efficiently responding to due diligence inquiries has grown, but the vehicles delivering the information remain largely paper based and individually constructed. Door studied over 100 questionnaires and determined that roughly 90% of the topics and information sought is the same but articulated in slightly different ways. To respond appropriately, this forces investment companies to complete Questionnaires one at a time. If 90% of the questions are the same, why not start with that information and build around it? Door was created to solve this dilemma and modernize this process – by utilizing a thoroughly crafted Standard Questionnaire (TSQ) and leveraging a secure digital platform, asset managers can use a “Common App” type of due diligence questionnaire to fulfill the requirements of multiple clients. This saves both sides time and money and offers many other functionality benefits.
The similarities between Door and the Common App don’t end there. The Common App allows individual colleges to ask “supplemental” essays as part of their application – usually brief prompts that ask students to provide deeper insight into their selves. Door offers similar functionality – while the Standard Questionnaire is quite thorough, occasionally an analyst may have a topic that is unique to that organization or requires certain nuance to help them to understand a strategy better. Analysts can include supplemental questions in every section of Door’s Standard Questionnaire to cover those topics. By leveraging this feature, analysts can add desired customization to the results and easily suit their needs without reinventing the wheel.
Also, in the same way that a completed Common App allows a student to apply to more colleges and increase the odds of getting into a program of choice, Door creates opportunities to expand a fund manager’s distribution scope to new channels and new markets, particularly for firms not blessed with unlimited distribution resources. Door works with hundreds of professional fund investors across the globe who are seeking access to detailed information on fund managers. A completed Standard Questionnaire on Door’s platform lets them know a fund manager is prepared to provide the information that meets their needs.
The fund industry is undergoing rapid technological change, with increasing pressures on margins and greater scrutiny of investment processes. More information must be captured, organized and processed than ever before, and all companies must utilize new platforms to not only seek out, but take advantage of opportunities to become more efficient. The lesson from higher education is that standardizing similar but individual activities can pay dividends for both users and receivers. The process may start small but once established the pace of growth happens exponentially. That’s why Door was created – to help investment companies and fund investors be better, faster, and more organized with their due diligence processes.
- Due Diligence
