It’s a David versus Goliath story. Randall Soderberg and his partner, Ishfaq Ahmed, carved a neat little niche in the financial software market when they founded Capelogic.

With eight employees on Route 33 in Monroe, it is a veritable “David” in the market, and their only competitor is Standard & Poor’s.

Founded in Randolph in 1999, Capelogic moved to Monroe in 2005. In January it expanded from 1,200 feet to 2,000 feet on the second floor of Monroe Professional Plaza.

Capelogic offers three lines of business, all associated with a financial product called a unit investment trust (UIT). Think of (UITs) as like mutual funds that are not actively managed after initial purchases have been made. A UIT has low management costs because the assets stay in the portfolio, usually until maturity.

“Years ago, many UITs were municipal bond trusts, and retirees lived off the income generation,” says Soderberg.

Now most UITs are equity (stock) funds with lower expense rates than a mutual fund. UITs can also be hybrids, combinations of equities and fixed income products.

“Most UITs are commission-based products for the buy-and-hold investors,” says Soderberg. The buyer pays the upfront cost, including the commission, but the expenses are low going forward. If someone wants to sell their shares of a UIT, the sponsor will buy them back. Capelogic offers software models that determine daily prices (Net Asset Values or NAVs) for unit investment trusts.

For one product, it takes prices from third party providers to do in-house calculations. “We evaluate more than 1,000 unit investment trusts on a nightly basis,” says Soderberg. “The majority of UITs that we evaluate are fixed income trusts, containing bonds that don’t trade every day.” Capelogic also provides the NAVs for equities and “hybrids,” combinations of both.

Its second product is bond evaluation software. Firms “on the Street” buy the software for calculating the daily values of bonds. They make these calculations for internal purposes — or they sell the information “to the Street.”

The third product is a retail order management software that helps distributors sell UITs to the Street. UITs can’t be easily be shoehorned onto many existing order management platforms. “Some platforms can’t handle those idiosyncrasies. With our system, a financial representative can look at the UITs available and purchase them. We route the purchase to the UIT sponsor and take confirmations from those trades.”

Soderberg’s business is not affected by the ups and downs of the market. He cites a municipal bond UIT that Capelogic added to its system in early April. It will last for 14 years. Capelogic will get a small sum for coming up with its daily value — but it will continue to get the sum for 14 years.

Soderberg admits that sometimes he had to learn from his own errors. Directly from college, he marketed his first product, a pre-Internet software for direct marketing companies that included inventory management and list management.

“It didn’t go so well,” says Soderberg. One vendor offered precision and a margin of eight percent, and the other was less precise but offered a 50 percent margin. The inexperienced engineers chose the more perfect, less profitable option. Wrong.

“I cut my teeth on that business and learned a very valuable lesson. As an engineer you build the best possible product, but in business it needs to be a combination of a good product, price points, and good relationships.”

Soderberg grew up in the Bronx, where his father was an accountant and his mother founded a community center for underprivileged children and seniors. He went to the Bronx High School of Science and graduated from Worchester Polytech in Worchester, Massachusetts, in 1982.

After the debacle in direct marketing software, he carried his direct marketing experience to an advertising firm (where he learned more about advertising). Then he worked at Standard & Poor’s (where he learned about financial services and met Ahmed, an electrical engineer from Pakistan).

Exiting S&P, he worked for another data vendor, where he headed the UIT department. When that department began to close, he realized that daily pricing for UITs was going to be an underserved market. He wrote a business plan. “I went to potential clients with nothing. They said if you build something, we will buy it.

“So we started in Ishfaq’s basement. We built something, took it back to the clients, and they liked it.” At that point in 1999 Ahmed lived in Randolph, but Soderberg yearned for warmer weather. “It’s 10 degrees warmer down here in Monroe,” says Soderberg. Now they both live in the Monroe area. Soderberg’s wife works for an advertising firm, and they have a school-aged daughter.

Capelogic does not send its work offshore; it would be against Soderberg’s principles.

“I’ve worked at firms that try to outsource software, but we have to be really close to the customers. We gather the requirements, release the first version, get comments, tweak. Gather, release, tweak. So much is about constant communication and refining,” says Soderberg. “Anything that requires heavy customer interaction needs be done in the United States.”

This isn’t a true David and Goliath story because of course Standard and Poor’s is going to stay in business.

Says Soderberg: “Hopefully Capelogic will continue to grow and expand its industry segment. If our customers grow, we grow.”

Capelogic Inc., 981 Route 33, Monroe Professional Plaza, Suite D, Monroe Township 08831; 609-448-7930; fax, 609-662-1719. Randall Soderberg and Ishfaq Ahmed, principals. Home page: www.capelogic.com.

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