Helping managers respond to due diligence demands
Technology innovation sits naturally with software provider Backstop Solutions Group. After all, it was one of the pioneers of providing a Software-as-a-service platform to the alternative funds industry back in 2003 to help managers operate more efficiently.
Increasingly, software providers are under pressure to support managers with solutions to establish data management best practices and operational robustness. By offering software solutions that span investor relations, CRM, sales & marketing and investor reporting, Backstop is empowering hedge fund managers to develop more efficient workflows that stand up to scrutiny when investors conduct operational due diligence.
“More and more, institutional investors are counting on managers to have all of their information on investor concentration and portfolio analytics readily available. In addition, we’re seeing that managers want the ability to access that information ‘on demand’ to meet ad hoc investor requests,” says Clint Coghill, CEO, Backstop Solutions, adding: “Whether it’s a USD100mn fund or a USD5bn fund, investors are looking for the same level of professionalism from the manager and to provide answers the same way.”
For smaller funds, this can be an onerous cost burden and it explains why cloud-based infrastructure continues to be adopted. Managers just pay for what they need. Solutions such as those offered by Backstop enable managers to build out data workflows and keep on top of investor details using investor relationship management tools. This makes them a more compliant operational outfit: a key attribute when trying to raise capital.
“At its core, Backstop is a relational database allowing managers to gain a 360-degree view of their investors,” says Coghill. “Each entity within Backstop contains various data points, which can range from contact details to a liquidity profile.”
It’s not just manager-investor communication that hedge fund COOs need to establish but also manager-third party provider communication to properly monitor their service providers and satisfy ODD requirements.
For example, the manager can monitor the service provider by logging into Backstop to check the last time they met with one of the team members, or they can give a potential investor details on a service provider’s disaster recovery plans. This is all part of the relationship management process and as Coghill says: “It helps to give investors the necessary level of detail as part of their ODD process when assessing a manager.”
Managers must also ensure that the regulators are kept happy. New managers registering with the SEC, for example, are likely to sit through a Presence Exam over the next couple of years, which will require them to submit detailed documentation to the SEC’s Office of Compliance Inspections and Examinations.
“Backstop offers a scalable solution that is flexible enough to allow managers to adopt their own systems or processes for ODD. We have dedicated team members that can work with our hedge fund clients to help them to put the best processes in place,” says Coghill. “If managers don’t have systematic procedures in place that can be consistently managed over time, they run the risk of ending up with a useless repository of data. Backstop can facilitate the creation of processes by sharing best practices and streamlining workflows.”
“The benefit of using Backstop is that the cloud allows managers to use more services as they grow organically. Backstop is a modular system that can expand in functionality as managers grow their funds,” concludes Coghill.
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