For asset managers, selecting the right fund accounting and reporting platform is a crucial step. Get it right, and everyone – from portfolio managers to back-office staff and investors – can benefit from a seamless experience streamlining many of the most important activities involved in successfully managing a fund.
Get it wrong, and executives can find themselves in a whole world of pain. Problematic technology can delay reporting, throw up compliance problems and force fund managers to embrace time-consuming manual workarounds. Most importantly, it can damage their brand by frustrating investors who may struggle to access investment information they need.
That’s why making the right decision about a technology platform and administrator to use is so important. “Firms that are lured in by a low upfront cost or well-known brand may live to regret it in the longer term,” says Jake Zornes (pictured), Managing Director at UMB Fund Services, a leading administrator in the space. That’s because the wrong decision can be hard to unwind and expensive to rectify. “Asset managers really need to dig in to determine if the technology that they’re selecting will meet their needs over the long term,” he says.
Getting it right first time
So, what are the key considerations asset managers need to be thinking about? One simple, but vital point is the need for compatible systems that can talk to each other. That’s especially true for fund managers running multiple funds with different investment strategies and supporting technologies. “If you’re using multiple systems, you may have difficulty producing consistent reporting for your investors,” says Zornes.
Another consideration is to ensure you can integrate your system effectively into external third-party systems. Zornes notes: “As you use different brokerages to help in your fundraising efforts, they all want information from the fund administrator to flow seamlessly to produce reporting on their platforms.”
Asset managers should always be conscious of the need for a properly scalable solution that can be easily expanded if they launch a new fund or expand an existing one. With decades of experience in the sector, UMB provides administration, accounting and investor servicing support to over 1,700 funds spread across hedge funds, private equity, and registered investment products.
Costs of a poor choice
Inadequate or poorly designed technology can quickly spiral from a minor irritation into a serious business problem. For example, delayed reporting for a fund caused by an incorrectly configured system can quickly impact tax reporting to the IRS or declarations to the SEC or other regulators. “Whatever the case may be, you have got to be on time with reporting,” says Zornes.
When things go wrong, funds may be forced to switch to a new administrator and technology platform – a process that is time consuming, expensive and fraught with technical complications. “It can be a challenging process, because of all of the information that resides with your administrator, all of the data, your journal entries, your investor information,” says Zornes. “Conversion costs are typically high. It’s not a simple turn it off and turn it on for somebody else. There’s a lot of information, data, and staff experience that has to migrate to your new administrator.”
Protecting your brand
Zornes says the worst-case scenario is when a fund ends up irritating its own investors and hurting its reputation. “You don’t want your investors to have a poor experience with you or your administrator because they aren’t getting the reporting or transparency they need. When your brand starts to deteriorate with your investors, you may have a more difficult challenge raising capital for future investment products.” Zornes says there is a clear trend in the industry for greater transparency – which can best be delivered via cloud-based technology.
Today, clients who invest millions – or billions – of dollars expect to be in the driver’s seat when it comes to reporting. They demand the ability to perform robust analyses and closely monitor certain aspects of their investments. They need the tools and technology to support these kinds of on-going assessments. UMB’s technology platform was built for flexibility. Customisation is at the core of what UMB does for its clients and their investors.
UMB offers a proprietary accounting product that serves as a single system which incorporates an investor portal, a customer relationship management platform, a general ledger system, as well as investment performance tracking, investor allocations and fee reporting. Zornes notes: “UMB has developed a proprietary technology platform called AltPro that offers all of these capabilities. What makes AltPro different from other systems is the seamless integration of these functions delivered through a single tool.”
Jake Zornes, Managing Director, Alternative Investments, UMB Fund Services
Jake Zornes is a managing director in UMB Fund Services’ Alternative Investments office in Ogden, Utah. He manages a team responsible for product development for the firm’s proprietary software, AltPro®. In addition, he assists with business development activities, including product demonstrations for prospective clients. Jake has worked in the fund industry since 2007, including more than eight years with UMB. He holds a finance degree and an MBA, and is a certified public accountant.
