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Cathie May Be Using This

đź“«Originally posted as part of the Sunday Newsletter
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Managing an investment fund; hedge fund, ETF, or other investment vehicle is really complex. You need to find strong investment opportunities in or out of the market, execute the transactions, manage risk, monitor portfolios, create reports for investors, and so on. And investment firms typically use different systems to do all this stuff, making the entire process even more complex.

But here comes Enfusion ($ENFN), an all-in-one cloud-based platform that makes investment managers’ lives a lot easier. Enfusion unifies mission-critical systems and allows managers to interact with all parts of the investment management lifecycle literally in one screen. From portfolio construction to trading and accounting, traders and portfolio managers can do everything on a single platform.

Enfusion’s modern system helps the company grow fast but at the same time it’s also profitable; quite rare for a SaaS firm. In the first half of the year, revenue increased 37% y/y to $50.8 million and the company reported a net income of $8.3 million. Meanwhile, its Net Retention Rate of 120% which means that clients pay on average 20% more every year, is a clear sign of the platform’s value.

Commentary

Like banks, the investment management industry has been left behind, regarding technological progress and Enfusion aims to change that. The company competes with legacy systems such as Blackrock’s Aladdin 🧞 but it’s actually the only platform built for the cloud so it has a strong competitive advantage. And with an estimated total addressable market of around $19 billion, its growth potential is quite large.

Enfusion has priced its IPO at a midpoint price of $16 apiece which translates into a market cap of $1.8 billion and a P/S ratio of 19.4. It’s a very reasonable valuation — even existing investors such as ICONIQ and Dragoneer have said they’re interested in buying shares at the IPO price. Existing investors typically cash out via IPOs, but in Enfusion’s case, they’re interested in buying more shares. This is a strong sign of investor confidence in the company and the current valuation. Shares start trading on Thursday.

đź“«Originally posted as part of the Sunday Newsletter
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