MDOTM secures $27 million for its artificial intelligence wealth management platform.

      The most talked-about area in finance AI isn't the trading floor, but rather the often unexciting middle office, where employees manage thousands of portfolios using spreadsheets. A startup founded in London has recently secured $27 million to automate this process.

      The company, MDOTM, announced it has completed a $27 million growth-equity funding round led by Expedition Growth Capital, bringing its total funding to $36.5 million. Established in London in 2015 and with offices in New York and Milan, MDOTM offers an AI platform called Sphere to banks and asset managers.

      According to the company, Sphere currently manages over $100 billion in assets for more than 60 financial institutions, with clients including Morgan Stanley, Amundi, and Zurich Bank. The new funding will support hiring initiatives and allow the company to expand further into the US and European markets.

      The Spreadsheet Challenge

      Sphere is designed to assist with the tasks that occur between major decisions. It analyzes market and macroeconomic data to identify changes in conditions. Investment teams can input their own insights, and the software then formulates portfolios that it can build and rebalance efficiently. Additionally, a generative AI component creates client reports and commentary autonomously.

      MDOTM divides its platform into three segments: one that identifies changes in market conditions and generates predictive signals; a second, named Portfolio Studio, that constructs and adjusts portfolios based on those signals and a manager’s insights; and a third called StoryFolio, which prepares client reports. Supporting this is the MDOTM Lab, an academic consortium of over 20 professors and PhDs focused on machine learning, portfolio theory, and AI ethics.

      The appeal of MDOTM's solution addresses a common challenge for wealth managers: declining fees and the demand for personalized portfolios. Hiring a large team of analysts is not sustainable.

      “Middle office operations continue to rely on spreadsheets for tasks like rebalancing, aligning portfolios with house views, and generating client commentary,” explained Steve Twomey, the Expedition partner who led the investment round. He argues this is precisely where AI can provide valuable assistance.

      An Intensifying Competition for the Back Office

      MDOTM isn't the only entity recognizing this opportunity. In the US, ex-Citadel quantitative analysts have raised $78 million to develop an AI platform for wealth management. Additionally, banks are introducing their own solutions, like Starling's agentic assistant.

      The trend of automating regulated middle office functions is expanding beyond finance, affecting sectors like legal and healthcare. This development comes as Europe’s fintech industry prepares for consolidation, typically benefiting firms with substantial enterprise contracts.

      Navigating the Skepticism Towards AI in Finance

      Integrating AI into investment strategies presents a challenge. Money managers must comply with regulatory standards and often harbor skepticism toward tools they can't easily understand. MDOTM itself functions in the UK as an appointed representative under the Financial Conduct Authority regulations. Its strategy involves maintaining human oversight while ensuring the AI's processes are transparent.

      “Asset and Wealth Managers are no longer questioning whether to implement AI in their investment strategies, but are instead focused on how to scale its application across thousands of portfolios while retaining control,” stated CEO Tommaso Migliore.

      This funding round has also resulted in the addition of seasoned professionals to the board. Twomey and James Hays, a former CEO of Wells Fargo Advisors with nearly 40 years of industry experience, are both joining.

      Expedition supports software companies that have managed to grow with minimal external funding, which aligns with MDOTM's decade-long journey and its $36.5 million milestone. The current expectation is that the often-overlooked middle sector of finance will be the next frontier for AI investments.