Hedge funds today expect their appointed administrator to do a lot more than merely strike the NAV and keep the Investment Book of Records up-to-date. Value-add services, such as data management, regulatory and compliance, risk, and performance and attribution – all of which utilise the same underlying dataset – are becoming an increasingly important diversifier.
“You have to have the right technology platform and systems in place to gather data and help managers report that data on the compliance and regulatory side,” explains Eamonn Greaves (pictured), Head of Business Development at SS&C GlobeOp, one of the industry’s leading fund administrators.
“One of the big initiatives in recent years has been to build our regulatory and compliance solutions platform. We consume huge volumes of data on a daily basis from our hedge fund clients and essentially store that data in a vast warehouse. The systems that need that information subscribe to the warehouse, pulling in information on an ‘as needed’ basis.”
In the last couple of years, dealing with regulatory compliance has become a major priority for hedge funds.
Using SS&C GlobeOp’s solutions, activities such as Form PF reporting, FATCA, Annex IV, CPO-PQR can be performed on a single platform, extracting information that traditionally goes into the NAV into the specific regulatory file. This is then automatically supplemented with investment management information.
“We can do this quickly because we have the data and our regulatory and compliance solution shares the same common data warehouse. Certain administrators have chosen not to get into the regulatory arena. With our solution, it has helped us get our foot in the door with managers and win new mandates,” says Greaves.
One of the key advantages to managers is that by relying on SS&C GlobeOp to do all the heavy lifting it avoids having to send the data to a third party to produce the report and worry that the outputs don’t match the inputs the manager has provided.
Moreover, using multi-purpose technology solutions means that the manager avoids needing to build in-house capabilities that have to be continually updated, have no scale benefits, and which cost operational dollars. There is now a growing expectation among investors that managers use third party specialists to provide the systems and controls at a reasonable cost.
“The variable fee rate is a key point. An administrator’s costs are generally based on basis points to NAV; as assets in the fund rise, the fees rise. As they assets decline, the fees decline.
“The model really works because if you hired a CTO, a group of developers, and had a lot of fixed costs, if the fund’s AUM were to drop then guess what, those fixed costs would stay the same. Variable cost is the new model and a better way for managers to run their business,” opines Greaves.
SS&C GlobeOp has also developed a transparency portal on the cloud. This gives managers real-time access to all of the reporting and data sets used.
“The way we’ve deployed technology puts everyone on a level playing field. Obviously the manager has to approve who can see the information but we have the technology to control how the manager shares fund data with investors, regulators. We have permissioning tools so if the manager only wants their investors to access say 30 per cent of the fund data we could set those permission limits accordingly,” concludes Greaves.
