Argomi, a Singapore-based startup taking paper out of the operations of hedge fund JL Capital, is in the process of launching a business for third-party asset managers, says Ned Lowe, co-founder.
“We want our technology to be for fund managers what Salesforce is for salespeople or Xero for accountants,” Lowe said.
Argomi’s middle and back-office functionality has been designed to compete against established vendors to the buy side – such as Bloomberg, Broadridge Financial Solutions and FIS-owned Sungard, as well as prime brokers – by embracing open APIs instead of building a comprehensive but siloed platform.
Given the firm is a startup, it is targeting new, small hedge funds that wouldn’t be able to afford the pricing models of traditional vendors, Lowe says. But if the business proves successful, he envisages it challenging established providers.
Argomi was set up by Lowe and Timothy Loh, partner at JL Capital, a Singapore-based hedge fund that was initially established by Timothy’s father, Hong Kong financier James Loh.
Argomi’s co-founders first met in 2006, when Timothy Loh was working at DBS as a swaps trader, and Lowe was working in Hong Kong as a programmer at Merrill Lynch.
The two kept in touch, even as Ned Lowe moved with Merrill’s to Tokyo and New York. When Tim Loh joined JL Capital, he wanted to give the fund the technological base to facilitate its growth. The two men kicked around ideas such as robo-advisory, peer-to-peer lending and crowdfunding, but couldn’t figure out how to make them work. “The cool ideas were based on assumptions of a technology infrastructure that doesn’t exist,” Lowe said.
Lowe moved to Singapore in late 2016 to help Tim Loh set up Argomi and attempt to build a scalable, tech-first platform that would let JL Capital or other asset managers build other businesses.
“If you want to do P2P or robo, you first need market data and lists of assets,” Lowe told DigFin. This means feeding investor and customer data into risk, compliance and auditing systems. “All the boring stuff” that traders and fund managers usually underestimate when they go into business for themselves, Lowe said.
Argomi began building the platform in 2016, and is now in testing mode. It plans to market its software-as-a-service model to hedge-fund startups before the end of 2017. It operates on AWS’s cloud, both for efficiency in computing as well as to shield itself behind Amazon’s cyber-security defenses.
The co-founders are launching in Singapore because of the government’s backing of API-driven business models. APIs, applied programming interfaces, are pieces of software that let two programs interact and share data. Argomi’s idea is to use APIs to help buy sides manage lists of investors and counterparties, and import market data.
Argomi is transparent about data sources and models, as well as pricing (it offers two monthly plans, one for transaction data, and a fuller version that processes things like mark-to-market positions and provides market data feeds); its proprietary service is in the processing and calculations.
But the SaaS model only works if a company can build a network effect: just as in trading, flow begets flow. Lowe says the company’s bet is that an API-based business model can, over time, achieve scale versus traditional vendors because it lets different sources of data talk to one another.
“Fragmentation of data is, like, the number-one problem in the universe,” Lowe says. “Okay, maybe that’s melodramatic.” However, he references his days at Merrill Lynch when isolated pools of data prevented the firm from obtaining a clear view of its Lehman Brothers exposures when that firm collapsed in 2008. “Fragmentation leads to operational errors and increased risk, and prevents big companies from being nimble.”
To that end, he sees Argomi has the potential to take on not just vendors but prime brokers, if it generates a big enough network of customers. Then it can provide consolidated views of risk and reporting, and mimic what a prime broker does except for the lending.
“But we might be able to do that too,” Lowe mused. “If we have a cash balance, we could use crowdfunding for lending and margin trading. Why not?”
For now, the company is set on winning its first clients in Singapore, and expanding to Hong Kong next year. Other markets on the horizon include Australia and a Japanese-language version, given Lowe’s five years of experience in Tokyo with Merrill Lynch.