Interview with Toni Pinkerton (pictured) and Kim Waldman, Maples Fund Services – Increased regulatory and investor pressures are inexorably raising the barriers to entry in the hedge fund industry. Managers launching today face an uphill battle to raise assets yet must also use third-party administrators to reassure investors, creating tension between cost issues on one side, and pressure to generate alpha and increase assets on the other.
Maples Fund Services is aware of this and has enjoyed considerable success working with US start-ups, helping to lift the firm’s assets under administration by 30 per cent. “At the start of the year we introduced a product called Incubator,” says Kim Waldman, director of business development, America.
“It’s designed to address the specific concerns of new managers in developing a track record and demonstrating to investors that they’ve implemented best practices from fund inception.”
The model provides robust corporate governance, independent administration and valuation, and industry-leading technology: everything a manager needs to hit the ground running without incurring prohibitive operational costs.
“Where Incubator differs from managers joining a platform and leveraging its infrastructure is that they are able to establish their own vehicle, so when they are ready to raise third-party capital, they can convert that vehicle into a fund structure while ensuring the track record is preserved,” says global head of fund services Toni Pinkerton.
Service providers have needed to evolve quickly to meet managers’ increased needs, in particular for more insightful, effective reporting in response to greater investor due diligence.
Middle-office support is now essential for any serious service provider, but Pinkerton notes: “Warehousing data in Advent Geneva doesn’t achieve much unless you can deliver it to clients in a way that allows them to make investment decisions, and supports their Form PF filings and investor reports. It’s using innovation to take things one step further. That’s where the extra layer of reporting really does add value.”
Waldman believes that data aggregation per se has been the key issue for managers, which in turn has spurred MaplesFS to develop new platforms. “For us it’s been driving our success – the way we address managers’ needs, providing information proactively and in response to client requests,” she says. “This led to the launch of our managed accounts platform a couple of years ago.”
After developing the ability to provide aggregated reporting across the platform, the firm consolidated its reporting across the complete spectrum of assets, enabling managers and their investors to take a holistic view of the entire book. “This has been driven by the institutional investor base moving toward more direct investing in alternative assets,” Pinkerton says.
The evolution shows how far administrators have come in meeting these middle-office requirements. “It’s also helped us develop expertise in risk analytics,” Waldman says. “It comes down to having sophisticated platforms robust enough to provide managers with information in the format they require.”
The fact that the SEC has devised a framework for regulatory reporting has necessarily caused managers “to approach the way they report data in a different way”, Pinkerton says. For service providers, the challenge is to be flexible enough to support the managers’ unique needs.
No two managers will ever report things the same way. Waldman adds: “That’s why it’s so important to partner with clients. What’s valuable to one manager is not valuable (in term of value proposition) to another. Partnership takes on a whole new meaning.”