Forget about outsourcing. The way of the future is co-sourcing, at least according to Apollo Global Management, an alternative investment manager with $60 billion in assets under management. The New-York based firm has just announced a partnership with Gravitas, who will provide it with operations, technology and risk compliance services.
While co-sourcing is a practice that has been around for some time often as a service performed to supplement a firm’s existing internal audit department, it is a novel approach for an asset manager, and according to Gravitas it is a model that an increasing number of funds are likely to adopt.
Apollo’s co-sourcing model will ensure that Gravitas employees are in the same building as Apollo’s employees. Staff will be sourced, hired and managed by Gravitas while Apollo’s subject matter experts will provide the product specific training and expertise needed to support Apollo’s funds.
The Gravitas co-sourcing service, which is a long-term project unlike a typical in-out consulting assignment, should serve to provide more control and transparency to a client than traditional outsourcing, and will give Apollo the scalability and control they require with 25%-33% in cost savings, says Gravitas CEO Jayesh Punater.
"It started with asking ourselves, how do we create scale without adding headcount? We started with risk management and created a pilot project that spread across different business units," Punater explains.
Co-sourcing is a model that large funds as well as start-ups are likely to adopt as they grapple with uncertain economic conditions to produce alpha, according to Punater.
The reason behind co-sourcing’s likely rising popularity is that large funds like Apollo face a scale issue as well as a rationalization of cost issue and regulatory pressures. "They face doing more with less. The burden of running a firm like that is very heavy," he says.
In addition to large firms, start-ups and small firms can also draw benefits from co-sourcing, Punater points out. "Many smaller firms have to give detailed reporting and risk exposure. To hire a full-time risk person is very expensive."