Companies are getting their strategies together and closing their budgets for 2021, and many of us will be hoping for a better outlook, with recent news of multiple vaccines helping maintain a steady rise in confidence heading to the end of the year. Portfolio managers in turn will be considering global trends in their plans for 2021, and they need reliable information. Information that a company like Scorable, based in Berlin’s buzzing StartUp scene, is looking to take global with Portfolio Management and Research as a Service.
Brand Deutschland has taken a hit in recent years, with Deutsche Bank’s Head of Accounting being probed by the German audit watchdog over his role in the Wirecard scandal as recently as last week.
Yet German innovation has not been deterred, with Scorable being yet another example of a sophisticated tech firm hailing from Germany.
Following recent news about their merger with BondIT from the US and Israel, #DisruptionBanking decided to sit down with the founders of Scorable and find out a little more about where they have come from and where 2021 will take them.
Oliver Kroll, Co-Founder and Managing Director is experienced in areas like Fixed Income and Artificial Intelligence, and explained how him and Philippe Padrock, the other Co-Founder and Managing Director came up with Scorable:
“The origins of Scorable was a collaboration between the captive asset manager of Talanx insurance group called Ampega Asset Management and Deloitte. I worked as a portfolio manager for Ampega at the time and handled the portfolio of Hannover:Re, which is also part of Talanx. We started thinking how we can make use of artificial intelligence for credit risk assessment and as we didn’t have the capability to do it alone, we started to look for someone to help us. This is how Deloitte as a consultancy and company builder came in. The start of the collaboration was when Philippe and I met for the very first time at the beginning of 2018.” Kroll shares fondly.
“So we met back then and completed a project, a project in which we found out that yes you can use artificial intelligence for analysing credit. The second thing we found out was that there was high demand in the market for this type of know-how. When we understood that others in the market were looking for this type of solution too, we decided to establish a completely new company. The company is Scorable, we founded it at the end of 2018 and Philippe and I are the founding team.” Kroll continues
“Why a new company?” Padrock asks, “Why not an in-house team built with Ampega Asset Management? And, yes, there are tech budgets at the large asset firms, but I think what is really needed is the agility, flexibility and the outside-in view to come up with the best possible solution and engage with multiple clients and partners in an ecosystem play. By creating Scorable, we can give more comprehensive solutions rather than resolving a company-specific problem only by putting massive resources behind it. Add to that, that not every asset manager is a tech company or has the necessary expertise. We had the possibility to step out of this landscape and develop a technology that addresses multiple user and client requirements in one solution and then get back to the clients and ensure we can provide the best possible solution.”
“It is very common now to look for a partner who can help you rather than providing a large tech budget in-house at an asset management firm. Of course, the asset managers can solve similar problems in a different way, maybe more extensive and maybe more cost intensive. At the end, we can come in and offer them a technology solution that can adapt to what they already may have built in terms of data lakes and we can feed into that, which is more convenient for them because they leverage this ecosystem solution approach instead of investing in dedicated tech resources.” Padrock continues.
Of course, many of our readers will be more used to the financial landscape of Germany being dominated by Cities like Frankfurt and perhaps Hamburg or Munich. Indeed, Oliver Kroll himself has spent much of his career working for companies in cities such as Hannover and Cologne. Yet, the operations of Scorable are based in Berlin.
“Why did we establish the company in Berlin, when Ampega Asset Management is based in Cologne?” asks Kroll, “This was a clear decision from the outset. We wanted to make use of the ecosystem in Berlin. You don’t need to have your base where the customers are, you need to be based where the people you need for your team want to work, and this was clearly Berlin.”
“In Germany, Berlin is still ‘The’ startup hub, so you get to attract the best people. Talent is much better in Berlin than in other cities. From a networking perspective it is also better to stay in Germany, so we didn’t consider going either East or West when setting up.”
“Our 20-person team in Berlin is what is behind Scorable, made up of people from 10 different nationalities. We have onboarded them since the end of 2018 and we were overwhelmed with applications, meaning we were able to choose from the best. We can really say now that we have top class data scientists, state of the art tech experts and highly-skilled people across all functions on-board and these are the brains behind Scorable.” Kroll continues
Not many StartUps anywhere in the world manage to achieve success of any description, location is not the decisive factor behind a StartUp. Usually it takes over 3 years to get your new product out to market with any degree of success, but with disruption rife across banking and financial services companies in the data space are growing much quicker than we have ever seen before.
“It all started with this project that Oliver mentioned, and this project was not just a strategy analysis on paper, but we quickly moved to the development stage of building prototypes. However, we were never in any accelerator programme, we wanted to validate different technologies and solution approaches.” Philippe adds.
“We came up with a first MVP (Minimum Viable Product) after one year and this gave us certain iteration. We gained a certain perspective on the output and model accuracy that we wanted to achieve and the data types we wanted to include. And of course, we tested various methodologies related to Big Data and NLP.
“We tried many things on our journey and we eventually came up with the solution we have today. We had a plan, but we were open to new ideas and tried not to limit ourselves to any technology or methodology. It was the freedom and agility from day One that allowed us to act as an independent company, build the startup culture and make sure we can come up with the best possible solution.”
“We focus on institutional investment,” Kroll continues.
“We are collecting appropriate data, but we are not mining or pre-selecting data, instead we are using data packages from professional providers and we add text data to this. In our case these are news articles from a big news provider. We analyze these news articles using NLP and then combine this with our quantitative data so that in the end we have a combined model with one output.” Kroll adds.
“It is a combination of quantitative and qualitative data.”
“There is not one number that explains the accuracy of the product. The accuracy of the statistical model is significantly higher than 80%, but there are numbers that are more important to our customers than these statistics. Our analysis shows, for instance, that credit spreads of issuers where we predict a significant deterioration of the credit risk widen by 20% more than the spreads of issuers where we don’t have that significant probability. And this is where our customers can make money.”
“This is the type of insights that matter to our customers and our target is to improve the model continuously, so it offers the best possible value to users.” Kroll continues.
“Our merger with BondIT now allows us to offer Portfolio Management and Research as a Service, so customers can fully automate and optimize the investment process with a fully customizable solution. Customers can include their own proprietary data in the solution for an even more accurate output. We haven’t seen this in the market before.”
Scorable just issued a Press Release about their merger with BondIT:
“We started in Central Europe and initially chose to focus on French and German speaking countries, where most of continental Europe’s largest asset managers are based, whilst having an eye on further markets. This merger really allows us to go global, and our product offerings are designed to attract customers anywhere in the world as the fixed income business is international. There are some local specialities, but bond trading is the same all over the world.” Kroll shares.
“The BondIT merger is exactly what we were aiming for. Our products are a natural fit and we both target fixed income investors, but from a different angle, portfolio construction here, credit research there. By combining our technologies, we can create what we call Portfolio Management and Research as a Service. This merger also increases our footprint globally, and we look forward to making use of the network that BondIT has for the benefit of both of our companies, leading to an increase in our customer base.”
“We will kick this off with the European and American market, but this is only the first step. We already work with BondIT on many large projects, so we feel we are ready to embrace the future confidently.” Kroll summarizes.
Finally, we asked Philippe Padrock, Co-Founder and Managing Director, and previously at Deloitte, to share his outlook for 2021 with us:
“ESG is a content topic for us as well, it is certainly on our agenda. But 2021 will be about building the business with our clients, the next product iterations and the successful integration with our colleagues in Israel and the US. We aim to grow fast in the next 12 months with our products and already increasing client base.” Philippe shares.
“We are in the process of becoming one company with BondIT. We aim to have all the administrative and organizational processes in place by January, so we can focus on building the product together with the joint teams, whilst targeting our joint markets and raising awareness amongst our customers.”
“BondIT has a strong footprint in the US, Israel and some clients in Europe and the Scorable team has built a presence in Central Europe. We have two innovative products, one being focused on portfolio management and process coverage and the other on credit analytics. In the next few months, we will combine these products and bring our joint solution to the market.” Philippe concludes.
So far N26 has been the biggest story out of Berlin. With companies like Scorable forming in a StartUp hub lauded as possibly the best in mainland Europe, maybe Brand Deutschland has more surprises for the global eco-system than we once thought.
#PortfolioManagementandResearchasaService #PMRaaS #BerlinStartupHub #Artificial Intelligence #Credit Risk #NLP #Data #PortfolioManager #DataScience #DataScientist
Author: Andy Samu