Leading on Portfolio Construction, Risk and Analytics
As a true microcosm of the company itself, Sam Hikspoors’s department is tasked with achieving something simple in theory but difficult in concept: provide small-to-mid-sized institutions and individual investors with access to liquidity in a simple, rapid, and cost-effective way, while also managing the company’s portfolio exposures, market risks, and hedging programs.
With over 15 years of experience in quantitative investments, portfolio solutions and analytics, Sam used his expertise to create Ben’s Portfolio Construction, Risk & Analytics team, or Ben’s Risk team for short. His team is responsible for the firm’s top-down investment strategies and analytics, from macroeconomic forecasts and hedging programs to Ben’s fund pricing capabilities and strategic portfolio allocations.
Ben’s primary operating business involves providing liquidity to customers via the making of loans to specialized trusts that use the loan proceeds to acquire our customer’s interests in professionally managed private investment funds (“Alternative Asset”), with such loans collateralized by and repaid through the trust’s acquired Alternative Asset (the aggregate of such collateral at any given time, the “Inventory”). Ben’s Risk team plays a crucial role in managing the firm’s market exposures while also providing asset allocation guidance on the Inventory. To achieve this, the Risk team has created a quantitative strategy environment and culture that helps the company more efficiently serve its clients and further Ben’s overall goal of democratizing the private alternatives market.
In a recent interview about his department, Sam discussed Ben’s analytics capabilities, the unique makeup of his team, and how its data-driven approach to investment, risk and portfolio strategy seeks to empower Ben’s customers through easy access to better liquidity solutions.
Building Ben’s “Backbone”
Since the formation of Ben’s Risk team, I have sought to create a department that acts as the backbone of efficient liquidity management at Ben, from deal pricing and portfolio risk management to novel data science projects and related analytics. Our efforts created the processes and functions needed to work with individuals and small-to-mid-sized institutions that wish to invest like large institutional investors and obtain liquidity against all types of private funds, including private equity, venture capital, private debt, real asset funds, and more.
Before Ben can price various private funds and propose liquidity options to its customers, my team evaluates those assets against our current portfolio to identify key areas for potential growth as well as expected risk/reward tradeoffs based on current market conditions. Built with three main functions in mind - portfolio construction, quantitative analytics, and risk analysis – my team is developing efficient data-driven processes and tools that ensure Ben’s liquidity solutions and inventory management is as accurate and risk-aware as modern techniques enable us to be. This in turn allows Ben to mitigate underwriting sources of risk and to appropriately diversify its allocations across market segments, resulting in improved pricing on incoming liquidity requests.
At the heart of the Risk team’s contribution is Ben’s Total Portfolio Management Framework, which provides a coherent management framework across all of Ben’s top-down management capabilities, namely: market and fund forecasts, portfolio allocation and risk monitoring, hedging programs, and fund pricing. All the above components and related algorithms are managed within Ben Analytics System (BAS), the firm’s centralized analytics environment, built and maintained by the Risk team.
Together, my team produces algorithms that help deliver optimal risk-adjusted strategic allocations to produce sound and well-diversified portfolios across asset classes, regions, and sectors of the economy.
Additionally, the Risk team utilizes BAS’ capabilities to bring efficient algorithms, processes and other critical internal assets such as portfolio dashboards, pricing capabilities, and loan management tools to the entire firm via our Risk Portal software. I personally see BAS and Risk Portal as core components of what makes Ben a modern data-driven liquidity platform that has the operations and capabilities to scale its operations to meet the demand of both retail and institutional client needs.
My department, along with other business units such as Ben’s Underwriting and Origination teams, enable our company to effectively serve investors who normally would not meet the criteria needed to work with traditional secondary funds, due to the lack of time and resources usually required in such transactions. And we accomplish this by employing modern systematic investment processes, risk monitoring, and related technological innovations.
Bringing Modern Quantitative Investment Strategies to Private Secondary Markets
While traditional secondary funds may manage a handful of large deals over the course of one year, we strive to close thousands of transactions during that same timeframe. For Ben to successfully operate at this scale, we have adopted a modern data-driven approach so my team can price assets and loans with the press of a button.
In my view, this is truly what sets Ben apart in the industry because, while other liquidity providers may be using some quantitative tools, they have yet to implement a fully systematic and data-driven approach. Without this, they must continue to rely on lengthy spreadsheets and often utilize unnecessary manpower, while Ben focuses on building repeatable, scalable processes needed to cope with the large number of smaller liquidity requests expected from our target market.
Many of Ben’s Risk team members previously worked at sophisticated quant hedge funds and investment banks where they operated in more traditional asset classes and focused on established modeling structures. It was only when they came to Ben and married their financial engineering backgrounds with private markets knowledge that we truly uncovered what was possible within Ben’s business model and developed tools like AltQuote™ (expected launch Q1 2023), which is designed to provide customers with initial pricing for their alternative assets in as little as a few minutes, or OptimumAlt™ and AltC® which help manage Ben’s Inventory.
While we already have achieved some success with our models and strategies, technologies are ever-changing, and the status quo is not what we aim for. We are determined to stay ahead of the curve, to constantly push toward better models and deal pricing processes, ultimately to better serve our customers and close more deals than previously possible in our industry. These are just some of the ways we continue to push Ben forward and stay true to our mission of making our industry more efficient, transparent, and accessible to all investors.
Partnering with Oxford Economics
One way we continue to push the Ben vision forward is by combining our unique liquidity solutions and other services for investors with deep and meaningful macroeconomic insights and forecasts. Ben has formed a partnership with Oxford Economics to publish papers and provide all types of investors, from institutions to retail investors, the information they need to better navigate how changing economic conditions impact their alternative investments and broader portfolios. Readers can find Ben’s most recent work with Oxford economics here at here.
Starting in 2023, these papers will be published on a quarterly basis, with the next paper delving into the turbulent economic outlook for the coming year, its key drivers, and how investors can best protect their finances.
In addition to the benefits this poses for Ben’s own private modeling forecasts, this collaboration has been crucial in demonstrating one of the many ways my team and Ben as a whole can assist investors when navigating the market and when seeking liquidity options. I fully believe this partnership brings enormous value to the company and our customers, and like our quantitative management style and risk analytics, will only continue to do so for years to come.
At Ben, we have crafted a suite of reliable, ongoing liquidity solutions for investors in alternative assets. Our process seeks to give investors access to hard-earned investment capital, with liquidity provided from our own balance sheet. Contact us today to schedule a consultation with our expert team.
Subject to Qualifications
These materials are provided for illustration and discussion purposes and are not intended to be and do not constitute financial, tax, legal, or investment advice or recommendations, an offer to sell or exchange, or the solicitation of an offer to buy or exchange, any securities. Securities brokerage services are offered through Ben Securities Company L.P. (“Ben Securities”), which may provide certain materials to recipients. Ben Securities is affiliated with The Beneficient Company Group, L.P., and/or any of its affiliates, subsidiaries, and successors (collectively, “Ben”) and is a broker-dealer registered with the Securities and Exchange Commission and various states and a Member FINRA/SIPC. Investments involve risks and are not suitable for all persons.