Thu, 27/09/2007 - 14:07
In its three years in Dublin, UBS Global Asset Management's Fund Services business has seen its assets under management grow to more than USD18bn, but that has not been the result of a drive to accumulate assets regardless of other considerations. Rather, it stems from a strategy of building relationships with clients that have the ability to grow, which is more important than an arbitrary minimum level of assets.
The growth of Fund Services is underpinned by two factors that seem at first glance to contradict each other: enabling clients to handle all issues relating to the administration of their funds through a single person, and providing the technology to automate processes as far as possible to maximise timely delivery, accuracy and efficiency. The most important differentiating factor for UBS is offering clients a single point of contact. The fund accountant responsible for the fund controls the servicing process from start to finish - they don't have to do everything themselves, but they must be able to report to the client from a position of knowledge and understanding. The fund accountant can discuss subscriptions coming into the fund and redemptions from it; they can talk about investment decisions with the portfolio manager and be aware of which investments made a profit or a loss during the previous month.
In what remains clearly a people business, the single point of contact is crucial to UBS's relationships with its clients and offers the firm a competitive advantage over administrators that box off their servicing process into segregated activities. Clients have made clear that they don't want to be shunted around between different people, nor do they wish to deal with an intermediary whose role is simply to pass them on to the right person. They want someone whose job is to see the complete picture and make sure they can answer any questions that may arise.
Alongside the relationship is the drive to achieve straight-through processing, which is vital for any administrator because it provides the scalability that enables them to take on additional business without having to increase staff numbers at the same rate. This ability to create fresh capacity is especially important in an environment like Dublin where the demand for skilled staff and the facilities to accommodate them creates upward pressure on personnel costs and other overheads.
Straight-through processing is also important because it reduces risk, avoiding the possibility of errors creeping into accounts or shareholder records through repeated manual input, increases operating efficiency and reduces costs, all of which contribute toward improved service for the client.
Automation of processing is also becoming important as a result of the increasing blurring of the distinction between traditional and hedge funds. Today developments such as Ucits III are allowing mutual fund managers striving to achieve alpha to adopt hedge fund techniques, investing in assets such as OTC derivatives and interest rate swaps and mimicking shortselling through the use of derivatives.
Meanwhile some hedge funds are taking on some of the characteristics of mutual funds, notably frequent valuation and reporting. For UBS, streamlining processes and moving toward STP is central to providing a better service to the client - and enabling hedge fund managers to provide, in turn, a better service to their own investors. Client focus is not just a glib phrase but a cornerstone of the culture at UBS, as much in hedge fund administration as in every other area of busines.
Donard McClean is head of Fund Services, Ireland, UBS Global Asset Management
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