Polen Heads to the Cloud: Polen Capital's Andrew Powers

“I guess I’m not quite used to cities like this,” Andrew Powers, director of IT at Polen Capital and a lifelong South Floridian says, watching the cars scream past as the Tuesday afternoon traffic by Boston’s Copley Square begins to swell, like a rush of blood to the head. 

He is in Boston to oversee the development of Polen’s new office, which will eventually house the firm’s new small-cap growth team. The launch is the latest in a string of new funds from the asset manager, which has experienced rapid growth over the past few years, and, like its new office location, has itself become something new.

Headquartered in Boca Raton, Florida, Polen Capital has been around since 1979, and was, until recently, under the stewardship of its founder and namesake, David Polen. It has an unusual focus in its portfolio, investing in limited numbers of companies that it deems to be of a certain quality against its strict criteria, and then remaining as a long-term investor.

For decades, Polen was happy to manage relatively small quantities of money—$1 billion, $2 billion, small fry in the voracious world of asset management. That began to change with the appointment of Stan Moss as COO in 2003, who would later become the firm’s CEO in 2012. 

Moss, while still retaining the firm’s investment philosophy, began to diversify the product mix, opening it up to retail money and creating a blend of that sector with institutional mandates and individual wealth management, while launching a number of domestic and international growth strategies.

The results have paid off. From assets under management of around $2 billion in 2003, Polen grew to around $4 billion by 2014. Now, in 2017, it manages $15 billion. Such growth in a short period of time doesn’t just result in a ballooning balance sheet, however. It also necessitates change at a technological and an operational level. Moss had a clear vision of what that would mean for the business.

“The firm had been experiencing tremendous growth over the past several years, and we were outgrowing our existing portfolio accounting and order management systems, and we were also launching products that our existing systems weren’t capable of handling in the most efficient way,” he recalls. “With that, we started evaluating technological solutions. We wanted to be cloud-based, for certain, to be on a single system, as opposed to dual, and to be at the leading edge of technology.”

For that, Moss needed Andrew Powers.

DOS and dBase

Born in Tampa, Florida, Powers doesn’t have the background typical of a technologist. Whereas most IT directors on both the buy side and the sell side majored in computer science or engineering, he earned his undergraduate degree in finance at the University of Miami. Still, the signs of interest were there from an early stage. In the course of attaining his degree, Powers undertook an internship at Citi International Private Bank. But far from making coffee or sitting in on advisory meetings, his time at the bank was steeped in technology, elbow-deep in the guts of the firm’s data that tracked customer interactions. Powers built a database in Lotus to track this information, and later, an application in dBase.

That could have been the end of it, though. At this point, the usual career track for Miami finance grads was to go straight from graduation into bank management training programs. But Powers was entering the workforce at a bad time. A downturn in the economy during 1990 meant that many of these banks were consolidating their operations, shutting down, or cutting back where they could—and part of these cuts affected the traditional route from gown to suit.

Powers talked to his business fraternity’s faculty advisor, Dr. Lewis Tamares, who instead had an alternative proposition: Powers knew Lotus and he knew dBase, so why not teach this to the university’s thousands of administrative staff, PhD students, professors and others?

Seeing that this gave him an opportunity to not only work during a down market, but also to pursue his master’s degree in business information systems, he accepted.  “So he offered me the job, I took it, and we had a training program where we taught Word Perfect, Lotus, dBase, all these DOS applications,” he says. “But my first PC I got with the job came with Windows 3.0. My boss told me to figure it out and then teach a class on it. So my claim to fame is that I taught 8,000 administrative employees of the University of Miami how to use a mouse.”

First Brush

It wasn’t until his wedding day that his first real brush with the industry came. Powers’ father had been a broker for Merrill Lynch, becoming one of the first to work in the firm’s new Tampa office during 1962, and later going on to become co-chairman of the board of Merrill Lynch Australia. During that time, the senior Powers came to know a man named Tom Hansberger.

Hansberger was in the beginning stages of his next project, after his firm, Templeton, Galbraith and Hansberger, was sold to Franklin Investments in 1992, forming what would become the mutual funds giant Franklin Templeton Investments. Through his father, Hansberger knew that Powers was fast becoming a technology expert, and while attending his wedding in 1994, he passed him his business card, telling him to call him when he was back from his honeymoon.

Powers promptly forgot about the encounter, and that could have been that. Luckily, Hansberger did not. Toward the end of the postgraduate degree, he called Powers with a job offer. “I was hired in February 1996 as the IT and computer guy. I was the eighth employee—we had an ops guy, a finance guy, a couple of research guys; there were just a few of us,” he says. “But Tom did have the relationships in Russia, India and China for the multinational Templeton clone he was starting, and those offices came online in that first year. By the end of the year we had 36 people and $2 billion in assets under management.”

It was a time that Powers describes as “frantic,” with new hires, institutional mandates coming in one after the other, and the concomitant due diligence checks that each client performed. But Powers stuck it out, embarking on a career at the firm that would see him remain at the top as the managing director of IT for over 18 years, even after Hansberger retired and his company became a wholly owned subsidiary of Natixis Global Asset Management.

It was around 2014 that a colleague at the firm told Powers that he should look into a role that he had just interviewed for, at a small investment manager in Boca Raton called Polen Capital. Powers was hesitant at first—he was a technology guy, and this role was for an operations manager. Why would he want to do that? His friend told him to read the job description, which seemed to be focused far more on systems than middle-office tasks. At the interviews, he was immediately taken with the firm’s culture.

“When you talk to Stan [Moss], and Dan [Davidowitz], the head of what they call the focus, or the large-cap growth team, there’s this consistency and clarity of who they are, what they are, where they are, and what they want to do,” he says. “My joke is that it’s like an MBA textbook. Everything they’re saying is super best-practice, proper approach, and it’s very appealing, that vision they have for the firm and the way they look at the world.”

That vision, he recalls them saying, was to become a name-brand asset manager. But to do that, they needed Powers to execute a radical change in how the firm used technology.

To the Cloud

Even before he hired Powers, Moss knew he had a problem. The firm’s mix of clients—the retail, the high-net-worth investors, and the institutional side looked great from a risk perspective, and on the firm’s balance sheet. But that mix was challenging from a technology perspective.

“We searched the marketplace for single systems and solutions that could handle our book of business, which is somewhat unique in terms of technological access points due to the balance between institutional, high-net-worth, and retail that we have,” Moss says. “There are a lot of interfaces required owing to the variety of platforms and custodians that Polen connects to—some are institutional-based, some are intermediary platform-based, but there are not very many that can handle both.”

Indeed, the technology landscape at Polen was beginning to look like a forest. The new strategies had introduced a boom to the firm such as it had never experienced before, but it also meant that it needed connections to order management systems (OMSs), portfolio accounting systems, wrap platforms, wirehouses, managed fund accounts, and more. There were dozens of systems and dozens of interfaces to contend with.

To solve part of the problem, Moss turned to an old contact in the form of Bryan Dori, the CEO of Archer. Polen had previously worked with the vendor and outsourcing provider in 2007, when Moss, as COO, had selected it to launch the firm’s strategy onto various wrap platforms. Archer could provide Polen with access to best-in-class technology, which would significantly reduce the number of systems it had to manage. But more than that, it could alleviate the burden of having to engage in the laborious task of post-trade processing, an area that is hardly the bread and butter of small investment firms.

“That was, I think, the genesis of what they were trying to establish—to shrink their technology footprint and to focus on what was really important to them, which was servicing their clients and gathering assets, and outsourcing what didn’t add a tremendous amount of value, which was technology infrastructure and operations,” says Dori.

Benefits 

The extended partnership with Philadelphia-based Archer and the move to the cloud had further benefits, which were rooted in more practical concerns. As a work location, Boca Raton might be pleasant, but it’s in a hurricane zone, meaning Polen has a more pressing need than others to ensure its employees are able to work remotely. It’s also not exactly a hotbed of talent for middle- and back-office personnel, areas that Polen needed, but wasn’t particularly enthusiastic about keeping in-house.

But it still required a steering hand. Powers was brought on to manage this implementation, coordinating between Polen, Archer, and a consultant, Meradia Group, that had been employed to advise on the project. “When I was hired, the mission was to get everything onto one platform, whether that was Archer, or something better,” Powers explains. “When I came on, that’s what we did—we hired a third-party consultant, evaluated what was out there, and decided that nobody could handle that retail wrap space as well as Archer.”

Part of the complexity of the operation stemmed from the fact that this wasn’t just a simple migration to the cloud. There was 30 years of historical data to backload, as well as moving to Archer’s platforms, plus the fact that Polen was outsourcing much of its middle office. 

In addition to this, Polen had decided to replace a core part of its trading technology—its order management system—with Charles River. One of the main reasons for deciding on Charles River was compliance and the rules engine built into the firm’s investment management system. Polen hadn’t utilized an automated system before in this regard—checking compliance with account restrictions had been a manual task, which naturally inhibited what kind of account structures it could reasonably take on.

“In our OMS, we have thousands of accounts, and those accounts have a variety of restrictions,” says Moss. “Charles River is the leading technology in this area, and that implementation has helped us efficiently handle our existing restrictions—even those that we wouldn’t have been able to handle in the past. Now we can take on an account that has more complicated restrictions, whereas in the past, maybe we could not.”

The proof of the benefits can literally be measured in numbers. Powers says that the firm now has over 4,200 accounts on Archer, which it never would have been able to onboard before the Charles River implementation, while keeping the same attention to detail. In the nearly three years he’s been at Polen, the firm has never had a material trade error, Powers says.

Getting Ahead

The implementation took, by varying accounts, between nine months and a year-and-a-half to complete. But by the end, Powers had executed it “flawlessly,” according to Moss. Indeed, this would prove to be portentous in several ways—shortly after Waters conducted the interviews for this article, Hurricane Irma made landfall in South Florida on September 10 as a Category 4 storm, and caused widespread devastation throughout the state. While Polen’s premises did not suffer any damage, many of its employees were left without power for days afterward and downed power lines throughout Boca Raton created enormous difficulties and hazards for residents.

The establishment of the firm’s Boston office, too, has been relatively painless. There are no mainframes to install or cool, no infrastructural nightmares to manage—it’s just network connections.

But this isn’t the end of Powers’ efforts—he’s now turning his attention to another complex area of buy-side technology: data management. “My initiative for this year has revolved around a data warehouse,” he says. “The mandate from the CEO, his vision again in terms of being best practice and best-of-breed, is to have pervasive business intelligence and business analytics throughout the firm. The shortcut way to describe it is that I’m trying to democratize data access in the firm.”

As opposed to the cloud migration and everything else that went with it, this project is being managed strictly in-house, he says. Any enterprise data management strategy, in his words, needs to be a bit “DIY,” but he sees the potential as exciting. “I’m a big believer in the idea that the more of these tools you can put into people’s hands, with clean and structured data, the more you’ll be surprised with what they’ll come up with,” he says.

It’s another example of Polen Capital being perhaps more forward-thinking than other similar buy-side firms. Data management and governance exercises are, after all, often the preserve of the asset-management kingpins, rather than $15 billion shops. But for Powers, that doesn’t matter. “From what I understand, it’s typically something firms go through when they get a little bit larger than we are, but everyone I’ve talked to at the larger firms says that the sooner you do it, the better,” he says.

Given Polen’s recent growth rate, that might end up being a prescient move.