KKR is creating a new role overseeing its data strategy as private equity giants bet high-tech analysis will give them an investing edge
- Private equity giant KKR has hired Emilia Sherifova, the top technology officer at Northwestern Mutual, to develop a data-driven approach she says will play a "central role" in KKR's next stage of evolution.
- Private equity executives are seeing data strategy as a way to analyze investments and juice returns.
- Blackstone said last February it had created a data platform to support decision-making. Matt Katz, hired from Point72 Asset Management in 2015, heads up data scientists who work with the firm's dealmakers.
- Data insights help create opportunities and avoid mistakes, said Patrick Davitt, an analyst at Autonomous Research who covers KKR.
Private equity giant KKR has hired Northwestern Mutual's chief technology officer to develop ways for the firm to scour data for investment ideas.
Emilia Sherifova will be based in New York and have the title "chief information and innovation officer," a broader role than her predecessor. She replaces CIO Ed Brandman, who retired in December after 11-1/2 years at KKR.
The private equity industry is starting to pay more attention to data when deciding where to invest and how much to spend, with firms hiring data scientists to glean insights into buying patterns and broader economic trends. Firms have access to vast amounts of information from companies they own, including customer purchase receipts and occupancy rates.
"There is enormous potential to leverage cutting edge technology and data in a transformative way for this industry and I am very excited to drive this for KKR," Sherifova said in a statement, adding that a data-driven approach will play a "central role" in the firm's evolution.
Firms can see better returns if they put their data in one place that is easy to use for their investment professionals, said Patrick Davitt, an analyst at Autonomous Research who covers KKR and other private equity firms.
"It creates opportunities and helps you avoid mistakes," said Davitt.
Last February, Blackstone said it had built its own data platform to support investment decision-making. Matt Katz, who Blackstone hired from Point72 Asset Management in 2015, now leads a team of data scientists who serve as a resource to deal teams and help Blackstone-owned companies improve operations.
Sherifova will also help manage the firm's internal IT and make sure systems are up to snuff. KKR offered little detail on Sherifova's job responsibilities outside of a bare-bones press release.
One investment banker who works closely with private equity firms told Business Insider that he expected her role to include identifying trends in the investment due diligence process and aiding in the growth strategies of companies that KKR owns.
When asked about this possibility, a KKR spokeswoman did confirm that one of Sherifova's "key goals" would be to harness data to identify investment opportunities, "connecting the dots across the business and ultimately maximizing returns."
Some smaller firms are offering data science as a product to help private equity firms make decisions.
San Francisco-based Two Six Capital has two managing partners, nine data scientists and engineers and four advisers. The firm seeks co-investment opportunities alongside private equity and handles investment due diligence and operations improvement post-purchase, offering data analysis to inform judgment calls.
Ian Picache, who co-founded the firm in 2013, said the private equity industry has been a laggard when it comes to data science.
"The biggest technology advancement in private equity was the Excel spreadsheet, which came out in 1986," Picache said. "We thought there were a number of different ways to inject technology into the private equity process."
How KKR will change its own process going forward is yet to be seen, but the firm's recently-retired CIO offered some insight into where Sherifova may focus her efforts in a 2014 interview.
Brandman's biggest technology challenge, he told financial technology news site WatersTechnology, was the "rapid expansion of the business ... especially into new alternative asset classes, and creating a high-touch service model," while his IT wish list included a "fully integrated public and private data for the ultimate set of analytics."
KKR's co-chief operating officers, Joseph Bae and Scott Nuttall, pointed to Sherifova's experience with "software development, digital transformation and operations management" in the statement announcing the hire. They said she has shown the value technology can create in "multiple industries."
Sherifova spent 2-1/2 years at Northwestern Mutual. Before that, she held technology leadership positions at two startups: LearnVest, a personal finance company, and PulsePoint, an ad tech firm aimed at growing audiences for marketers and publishers.