Innovation in the funds industry tends to be an overused buzzword. This is understandable, given that innovation touches all aspects of our daily lives, from the way we measure our health and fitness to the way we travel and work. There is a natural tendency, therefore, for companies to say that they are constantly innovating as if, by not doing so, they risk being seen as obsolete.
Thirteen years ago, Opus Fund Services was borne out of the need to introduce true innovation in response to the over-reliance on inefficient, manual-driven processes that prevailed in incumbent fund administration groups. The aim was clear: to build a fund administration business from the ground up that focused on efficiency, low risk and high value.
“We reflect our emphasis on innovation by the amount we spend on it,” says Mike Canni, COO. “Across the business, our single largest spend is our innovation team headcount cost. We look at innovation from the standpoint of creating the ultimate client experience; one where the cost is low, delivery is fast, the product(s) is accurate, and we provide clients with the most up-to-date tools and security measures.”
Innovation is applied at Opus in order to benefit every one of its clients, not just a handful of standalone customised workflows. This is not innovating for innovations sake, but to bring tangible gains to hedge fund businesses in the form of value creation.
Last year, Opus introduced JET, an automated ‘straight through’ NAV calculation engine. The automation of fund accounting entries has resulted in NAV processing times reducing by over 90 per cent.
“One of the key requirements when developing a new product like JET is that it can be used to service a USD5 million fund exactly the same way as a USD2 billion fund. This ensures we are able to drive down the cost of servicing funds on the smaller end of spectrum where cost ratios are of significant importance, whilst also allowing for significant investment in the unautomated discipline of client service for those managing billions of dollars. This approach provides our clients with a true institutional quality experience throughout all stages of a fund’s life cycle,” stresses Canni.
JET does everything from accruing fund expenses to reconciling cash, gathering portfolio accounting data, allocating P&L to investors, determining the management and incentive fees, generating statements, alerting clients to review and approve the NAV, not to mention the ongoing scheduling of investor statements. “JET is currently being used on 100 per cent of our hedge fund clients,” Canni confirms.
There is a tendency to overly complicate fund administration with too much innovation. At its core, fund administration is a straightforward activity: keeping track of a fund’s investment book of records. As such, when it comes to building the business logic to create a balance sheet or an income statement, it is no different regardless of whether the instruments being traded within a strategy are stocks, bonds, loans or swaps.
“Risk reporting or analytics reporting require specific systems and that’s where some fund administrators overcomplicate things. The business of fund administration is quite simple; it’s just debits and credits,” says Canni. All of Opus’s technology is proprietary with regards to workflow management and automation. During the design and implementation phase multiple iterations are developed.
As Canni says in conclusion: “Any product we create has multiple sprints so that if a new technology comes along during that iteration process, we pivot. When we design a new product like JET, we break it down into multiple sprints. The overall engine of the product has to be ‘plug and play’ to allow it to tap into new technology advances.”
