Innovation within an asset management firm can be tricky. The way that teams are split up, whether by asset class or product, can mean it takes place in siloes, while some teams may not have the resources with which to be creative.

Franklin Templeton began working on a solution to this issue about five years ago with an investment management and data science initiative aimed at helping its investment teams focus on what they do best: delivering alpha.

“We have different investment teams, and they’re all doing their own thing; they don’t have a common approach in terms of process,” says Chetan Karkhanis, SVP of digital strategy and wealth management for Asia-Pacific at Franklin Templeton. “So we’ve created for them a whole investment management and data science effort that is under our CTO’s remit. Their responsibility is to create that data infrastructure and data lake, and on top of that provide the tools,” he says.

The initiative began by laying a foundation: creating the database layer, or data lake. The firm then brought in data analytics providers such as Elsen and Databricks to help the investment management teams analyze data faster and visualize how that data is presented.

“What you need to do for investment managers is give them the tools and access to such technology. Otherwise, teams may just try to build it themselves in siloes, so it’s not centralized, or it’s more expensive … or they may not have the right talent,” Karkhanis says.

The common infrastructure essentially serves as a utility into which investment management teams can plug and play.

“Creating that architecture and structure is helpful for our different investment teams—equity, fixed income, multi-asset—that are looking at figuring out, for example, whether changing criteria for stock selection results in better portfolio construction and fund performance. So they’ve got the access to the datafeeds from Bloomberg, FactSet, and Worldscope Datastream, but they don’t necessarily have the tools or the resources to say, ‘If I feed this through a common data lake and then pull in AI, machine learning, data analytics techniques, what can I glean from these findings?’” he says.

Incubating plug and play

In line with this plug-and-play mindset, Franklin Templeton has partnered with F10 Global Innovation Network Singapore (F10), a fintech startup accelerator and incubator, to launch an incubation program in Singapore for early-stage fintech startups.

The incubation program, known as FT Singapore FinTech Incubator, is a two-year program that will kick off in July. Startups admitted into the program will receive $150,000 in seed funding from Franklin Templeton and will be housed at 80RR FinTech Hub, a co-working space in Singapore’s central business district.

“The game is no longer about just picking stocks or funds and putting them into a basket. It’s about ensuring you’re delivering consistent alpha and providing the best returns. And given the competitive nature of the industry today and the pressure on fees, as well as the pressure to outperform on a relative basis, we need to make sure our portfolio managers and research analysts have the best access to any technology or capability that aids and abets their processes,” Karkhanis says.

As part of the incubation program, Franklin Templeton is looking for startups in four areas: investment management, distribution and product, client experience, and operational efficiency.

Jonas Thürig, head of F10 Singapore, says F10’s programs generally receive between 100 and 250 applications from startups. Together with the team from Franklin Templeton, they will filter for companies offering interesting propositions that align with the firm’s objectives.

Those shortlisted will go through a thorough interview process that includes analyzing their offering and their funding status. “When we admit them to the program, yes, they will receive $150,000 from Franklin Templeton. But we want to make sure they don’t collapse after three months. That’s also an important aspect. Once we have done that initial interview, we will select a few that will pitch and present [their service] in front of an investment committee. Then we will do the due diligence with the finalists, and once they agree, they’ll sign a contract with us and Franklin Templeton, and then we will kick off in June or July,” he says.

Six Group established F10 in 2015 to promote Switzerland’s fintech ecosystem. PwC Switzerland and Julius Baer became joint corporate funding members in 2016. Over the past seven years, it has incubated more than 200 startups.

In 2019, the incubator expanded its presence to Singapore and Spain. F10 has two flagship programs—a five-month early-stage incubation program and an acceleration program. The acceleration program is mainly aimed at corporate partners, Thürig says, and involves them identifying specific problems and areas in which they want to innovate. F10 then scouts for startups that fit what the corporates are looking for and runs the three-month program focusing on facilitating collaboration.

F10 also delivers bespoke programs for corporates, such as the one it is running for Franklin Templeton. “This is a dedicated program with their branding, but we operate it,” Thürig says.

The selected startups for the FT Singapore FinTech Incubator will use Franklin Templeton’s and F10’s curated incubation curriculum, including two years of residency, and an individualized milestone-based program. The entrepreneurs will also receive extensive mentoring and guidance from Franklin Templeton and F10, and they can further leverage F10’s ecosystem of over 120 venture capitalists and a network of more than 70 mentors.

Over the past seven years, Thürig says F10 has refined its curated curriculum to include masterclasses on the topics that are most needed by startups. “[These topics] drill down on problem validation, go-to-market strategy, growth, and fundraising, which are important to help them get their pitch right, and then we introduce them to our VC network,” he says.

It’s really a startup finishing school, Thürig adds, as the vendors get a coach that checks in with them regularly along with access to F10’s entire mentor network.

“On the Franklin Templeton side, there are various touchpoints. They get to collaborate with Franklin Templeton business units, where colleagues from Franklin Templeton will be helping to facilitate these introductions, talking to the business units, getting them to understand what exactly the startup is doing, with the ultimate goal of starting a pilot and PoC and then, ideally, a partnership with Franklin Templeton,” he says.

Bill Murphy, a former Blackstone CTO and now managing partner at Cresting Wave, said while speaking on the Waters Wavelength Podcast that the problem facing financial institutions is that, too often, the key decision-makers are only making decisions on what they can do today. They should also be thinking about the future, and innovation plays a big part in that.

“Whether through acquiring a company, or applying a certain technology, will those investments be able to meet more of the firm’s needs tomorrow than it has today? Is there conviction in acquiring a company’s team, methodology, and architecture that will help the firm grow its technology stack along with the acquired company?” Murphy said.

“The best technology leaders are doing that. They are partnering with small companies and that’s how they stay ahead,” he said.

The F10 partnership is an expansion of Franklin Templeton’s global incubation program that began in 2019 with startup incubator EvoNexus in Silicon Valley. The firm also sponsors FinTech Sandbox, a Boston-based non-profit that offers financial datafeeds and APIs for development purposes.

Elsen, an analytics platform provider, emerged from FinTech Sandbox’s startup ecosystem, Franklin Templeton’s Karkhanis says. In 2019, the asset manager deployed the Elsen nPlatform to provide its research and technology groups with faster access to concordant data to develop new data-driven investment strategies.

“Often, if you look back and analyze how a portfolio manager made their decisions, how do you measure what they did right or wrong? AI and machine learning can help you do that, then you can look forward and correct and stress test it as you go along,” he says.

For all of this to happen, though, Karkhanis says you first must get the data layer correct, which is something that’s often overlooked.

“What our technology team is doing is building that on behalf of all our analysts. And what we’re finding with this incubation program is, ‘Let’s see what these incubated companies have.’ We can incubate them, we can use them as an application, support their growth and, ultimately, we may be consumers, or we may be more strategic partners in terms of what we’re trying to build.”