The world of investing is much different than it was in 2007. This was the first year that HGGC was in operation. Back then, most of the biggest and most successful private equity firms used very limited amounts of technology in terms of analyzing various investment opportunities. Now things have changed quite dramatically. This is because algorithms are now commonly used as a means of vetting investments. This was practically unheard of 12 years ago. However, it was HGGC that revolutionized investing forever by introducing this process. Now it has become standard in the vast majority of investment firms around the world.
One of the executives at HGGC knew a few people who had designed algorithms for some other businesses. He asked these people if it would be possible to create an algorithm that would be able to analyze potential investments by using a list of criteria. The computer experts believed it was possible. That got the ball rolling. It was not long until the first algorithms were being tested. The results were better than the company expected. Then the moment of truth came when they had to actually use the info provided by the algorithm to make an investment that is recommended. It turned out that the investment made a profit.
WATCH: Steve Young on his journey from @NFL‘s @49ers to co-founding a global @privateequity firm that oversees portfolio companies that employ more than 62,000 employees worldwide – https://t.co/ztKzHZHry0
— HGGC (@HGGC_LLC) May 10, 2018
The investing industry usually waits for other companies to make innovation and prove it to be successful before they will try it. The use of algorithms exploded in private equity firms once word started to get around that HGGC was having huge success with them. It is very rare to find large investing companies making investments solely on gut instinct. There is far too much money at stake to gamble like that anymore. Algorithms have proven to be far more accurate than any person could be. This is because they can take far more data into account.
Computers are now integral to the investing process. They are not going away any time soon. There is no question that HGGC would not be the company they are today if they never embraced modern technology and used it to their advantage.