Seamless private debt administration
The “private debt” bucket within the fund industry has seen tremendous growth, opportunity, and evolution over the last few years, with no signs of slowing down. The definition and composition of the private debt space has expanded in both breadth and depth, which has led to exciting operational considerations.
Private debt is used as a broad term for all non-listed debt and credit portfolios. “It is a resilient asset class due to its diverse make-up and ability to remain relevant and attractive to investors during all market cycles,” says Jorge Hendrickson, Chief Revenue Officer at Opus Fund Services.
For context, examples of private debt portfolios could include factoring and asset-based lending, consumer credit, small business lending, venture debt, residential and commercial real estate financing, project financing, credit facilities, litigation financing and marketplace lending. The list can go on, but the point is clear – private debt can mean a very wide range of portfolios and investment strategies which result in a wide range of fund structures, terms, infrastructures, workflows, investors, and counterparties.
The fund administrator needs to understand every moving detail, with the end purpose of reporting a NAV and capital balance to investors. Although this may sound operationally challenging, it also makes for a dynamic relationship between the administrator and all other counterparties involved such as the loan servicers, custodians, originators, valuation agents, banks, and auditors.
“These third-party participants not only allow for a successful operational infrastructure, but most importantly, create checks and balances at all points throughout the fund’s workflow, which is the ultimate service to the fund and its investors. This also comes with great responsibility.”
“Working with private debt funds is an exciting challenge. Even once a client is launched and operating, many will never stop evolving. As a result, we spend a great deal of time with our private debt clients consulting and helping them finetune their operational infrastructure to align with best practices and their other providers requirements. More so than other client types,” observes Jorge Hendrickson.
“It is critically important for us to dedicate high calibre teams and technology with a proven track record in private debt fund administration. There are many moving parts across portfolio accounting, fund accounting, investor services, treasury and year-end support,” Hendrickson notes.
He explains that the high touch nature of the relationship between fund administrator and fund client creates the need for automation and technology along the way which reduces manual work and mitigates risk. It also creates the need for robust reporting tools.
Hendrickson comments: “Our business model is well placed to meet these clients needs. Because we have focused on building technology to automate processes and deliverables, my colleagues can spend more time on value-add responsibilities for a client. This is important with all clients, but of relevance when working with private debt funds. We have built powerful internal workflows, proprietary tools, and apps with a focus on STP which leads to accurate and timely delivery of service. Ultimately, our internal technology enables the ability to provide meaningful and real-time data to the fund via our client dashboard. It also allows for robust and on-demand investor reporting. We just released the latest version of our proprietary client and investor portals, Symphony 3.0,” Hendrickson explains.
One of the other most critical elements of the administrator’s role comes at year-end when working with the fund’s auditors. “We see this as a real strength and differentiator, particularly when working with complex funds. Opus has developed a strong reputation for delivering a seamless year-end, particularly because of the transparency that we provide to all parties during this process, which becomes very valuable to the auditors, the fund, and ultimately its investors. By the 10th business day of January, we had already issued 75 sets of first draft GAAP financial statements which is a representation of all the work and preparation leading into the process.”
Chief Revenue Officer, Opus Fund Services
Jorge Hendrickson is Chief Revenue Officer for Opus Fund Services and is based in our New York City office. Prior to joining Opus in February 2013, he worked in Prime Brokerage Sales and Capital Introductions at Concept Capital Markets (now Cowen Prime Services). Previously, Jorge worked at Bay Head Capital allocating seed capital, managed accounts and infrastructure services to launch managers. Prior to this, he also held a variety of operational, trading and marketing roles at Intrepid Capital Management in NYC and Bridgewater Associates in CT.