James Eldershaw, director, PFS

Serving administrators ‘outside the box’

Download the special report Luxembourg Hedge Fund Services 2010

The number of third-party administrators in Luxembourg has been swelled by the emergence of middle-tier firms that can now compete with the mega-administrators on a global basis and are establishing a presence in leading European fund centres, says James Eldershaw (pictured), director with PFS.

Globalisation is being driven by administrators seeking to locate staff and infrastructure in the most favourable jurisdictions to perform their services from a tax, regulatory or cost viewpoint. A global presence also enables administrators to help managers react to any regulatory changes, such as the implications of the EU’s AIFM Directive for cross-border fund distribution.
 
However, globalisation also brings technology challenges. Firms require a system infrastructure to service client needs simultaneously across global offices and multiple time zones on a single application. PFS’s flagship PFS-Paxus, which is used to administer alternative funds with more than USD500bn in net assets, can support a global administration service across worldwide locations through remote access.
 
Global fund administration on a single system brings issues such as multilingual reporting, for instance where fund managers and investors share the same system but have different language preferences. PFS-Paxus now offers support for up to three languages on various reports, covering not only European languages but unicode characters such as Arabic (crucial for Shariah funds) or Chinese.
 
Administrators must also consider issues specific to the grand duchy, notably the vital aspect of confidentiality. Aside from the obvious importance of protecting client data, Luxembourg law strictly prohibits administrators from disclosing personal and account information about their customers except under certain conditions. For example, no personal data such as an investor’s name should be accessible to entities not covered by Luxembourg confidentiality rules.
 
To facilitate compliance, PFS-Paxus has a counterpart encryption function that makes investor details undecipherable without a valid cipher key. If the data stored in the underlying SQL database were to be accessed or stolen, it would be useless without a decryption key. In addition, investor correspondence such as contract notes and statements can be sent by e-mail in password-encrypted pdf format.
 
The drive to increase industry efficiency through technological development continues to gather pace. Increasing sophistication of systems across the industry is enabling faster reporting and real time transparency of the administrator’s records. For some structures, such as managed accounts, investors commonly request real-time access to positions and valuations on the administrator’s system.
 
PFS-Paxus will soon introduce a manager interface to enable reporting on a real-time or historical basis for full transparency. The interface will also permit, if enabled by the administrator, managers to enter their own trades to facilitate straight-through processing or interface trades via a data mapping tool that will allow the integration of front-office systems with PFS-Paxus without the need for bespoke customisation on each occasion.
 
Entering its second decade of servicing the alternatives industry, PFS-Paxus is moving ‘outside the box’ of the core functions historically associated with NAV generation. Support for functions such as position reports with Ucits tags, automated cash and securities reconciliations, on-demand feeds from price vendors, automated security master enrichment from price vendors and flexible data feeds from front-office systems all emphasise the quest to help administrators add value to the service they provide to their clients.
 
Click here to download a copy of the Hedgeweek Luxembourg Hedge Fund Services 2010 special report
 

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Download the special report Luxembourg Hedge Fund Services 2010


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