Some fund strategies trade more sophisticated products, so they need to understand how the administrator will process and deliver data early in the review process. Having an administrator that is not able to provide high quality information in a consistent manner can really set a fund back.
The hedge fund administration space provides countless options for funds of all kinds. With so many options, it is often difficult for funds to sift through the various providers and effectively pick the right provider for their particular needs and budget. When choosing a hedge fund administrator to partner with, a manager may encounter difficulty narrowing down exactly which one to select. Based on our extensive experience in proving systems integration and systems development for hedge funds and in selecting administrators for a number of clients over the past nine years, FinServ has developed a unique level of expertise in this challenging area specifically with the top 5 third party administrators. FinServ believes that hedge funds in the marketplace for new administrators need to consider these four factors, as their capabilities will significantly impact daily workflow and processing of critical information.
(1) Access to Data Most hedge funds strive to implement a data warehouse, a “golden source” of data they can rely on for all their reporting and data analysis. Thus, it is important that the administrator can support and facilitate one clean, central data source the fund can utilize on a real time basis for straight through processing. “Some fund strategies trade more sophisticated products, so they need to understand how the administrator will process and deliver data early in the review process. Having an administrator that is not able to provide high quality information in a consistent manner can really set a fund back,” commented Jason Varghese, a Senior Consultant with FinServ.
(2) Ability to Process All Asset Classes In terms of asset classes, Varghese explained that “funds cannot assume that all administrators are able to process all classes effectively—there may be areas in which they struggle. There are a select few administrators that have the ability to book complex instruments in their native form rather than utilizing shells as immediate workarounds, which ultimately loses critical attributes causing downstream issues. It is critical to identify and understand asset class capabilities of each administrator a fund may engage for service.” As a baseline, administrators should have a deep understanding of P&Ls and NAV issues. However, when analyzing more complex asset classes such as CDS, derivatives, and bank debt, that is where one can separate the wheat from chaff.
(3) Ability to Deliver a Regulatory Solution “The ideal hedge fund administrator should employ an experienced regulatory reporting team to design or deliver a solution to
meet regulatory requirements,” said Varghese. The important factor here is how scalable the technology solution employed is to evolve with new and changing regulations globally. Due to higher frequency regulatory deadlines, a fund would greatly benefit from a solution that will meet their existing and future needs. In the current marketplace having a regulatory reporting technology solution is mandatory for a top tier fund administrator, without it, a manager will have to look to outside providers to meet these new regulatory requirements.
(4) Technologically Savvy In order to provide the best possible service to their hedge fund clients, administrators need to be aware of the latest technology platforms, such as mobile applications and cloud-based environments. By staying on top of these new developments, administrators will be poised to deliver them effectively, giving funds the technological support they require. An increasing number of hedge fund clients are looking for enhanced functionality through a web-based offering allowing for faster reporting and greater transparency to their data. “Having a plan to implement new technologies is incredibly important for administrators to remain competitive in the industry,” added Varghese. These are some of the observations FinServ has made as we have assisted clients in vendor selection for third party administrators. If you have questions or comments about FinServ’s vendor selection process, please feel free to contact FinServ at firstname.lastname@example.org or (646) 603-3799.
About FinServ Consulting
FinServ Consulting is an independent experienced provider of business consulting, systems development, and integration services to alternative asset managers, global banks and their service providers. Founded in 2005, FinServ delivers customized world-class business and IT consulting services for the front, middle and back office, providing managers with optimal and first-class operating environments to support all investment styles and future asset growth. The FinServ team brings a wealth of experience from working with the largest and most complex asset management firms and global banks in the world.