The credit arena is expanding, buoyed by investor appetite for private credit and similar asset types. As managers look to enter new markets and offer investors new, potentially more complex asset classes, their need for greater operational flexibility and broader accounting support is growing.
“We see managers going deeper and deeper into the asset class,” comments Nicholas Nolan, Vice President of Solutions Management and Product Development at SS&C Advent. “Historically, we would see managers with a split of 90% syndicated and 10% private, but now that ratio is around 30-40% private.”
The shift means managers require greater flexibility in their accounting system because private loans are more bespoke in nature. Nolan says SS&C has responded with additional development of the SS&C Geneva® suite of products and services.
“These assets can differ in scope: multiple contracts with different day count conventions, unscheduled paydowns, and, generally speaking, a lot more nuance around how rates are reset and interest is calculated. From a Geneva perspective, we have had to consider these aspects as we continue to build on certain features within our systems – such as support for loans, structured products, fixed income, and derivatives.”
“To best serve our customers, we need greater flexibility and support for calculating accruals and user-based workflows for event processing and cash flow generation. This is where we have been investing and where our team is focused,” he notes.
The firm’s developments have resonated with equity managers moving into credit and credit managers moving into private capital investments. Nolan explains: “Giving managers the ability to have one system for life and not have to change how they operate our product is significant to us.”
Complex asset class
Due to the nuanced nature of credit as an asset class, Nolan has also observed a growing desire for managed services on behalf of clients: “There is an opportunity for managed services in this part of the market. Equity markets can be easier to manage operationally and tend to be straight-through.”
Credit comes with a lot more complexity due to the delayed settlement cycle, agent notices and overall irregular cash flows and events, which require swathes of reconciliations to be carried out.
Given this, more managers want to take advantage and partner with providers offering technology and services to support their back office.
SS&C Advent has been working on expanding the breadth and depth of its services to meet clients’ needs.
“Our Managed Services business started to take off in the credit space as clients wanted assistance around daily processing and data governance. They wanted us to assist with tasks like trade processing, loading valuations, P&L report generation, daily reconciliation, settlements, and month-end processing.”
“Before, we were very focused on selling software, which the client implemented, and we assisted. This has changed drastically in the last few years, particularly accelerated by COVID. Geneva also forms the backbone of accounting and portfolio management within our fund administration offering, SS&C GlobeOp. This makes SS&C well-positioned for firms to leverage Geneva, either in a fully-hosted and fully-outsourced environment through SS&C GlobeOp, or now in a co-sourced arrangement through our Managed Services offering. We are able to utilize the tools that SS&C GlobeOp has built around Geneva—mainly in notice processing, acquisition of data from counterparties, and reconciliation as part of our Managed Services offering for clients.”
SS&C Advent has been developing additional tools to facilitate the growth of its managed services business, alongside continued investment in its accounting software.
Nolan also notes this development has led to SS&C shifting its recruitment practices: “Previously, we were in the market for software engineers and great product people, particularly asset class experts in derivatives and bank debt. Now we need operations and accounting experts for the daily processing of bank loans, structured products, and derivatives – especially people who have worked for hedge funds, asset managers, or administrators. These professionals can help run these parts of our business.”
Sharper focus
This additional support allows the managers to focus on what they are good at.
Nolan says: “We spend a lot of time with clients upfront to understand their goals and desires are; what types of output they need or the types of demands their investors have of them.”
“Our clients are in the business of generating alpha by making prudent investment decisions to produce the highest returns for their clients. It’s not in their interest to be the best at reading agent notices, processing pay downs, or reconciliation – that’s why we’re here. We are the experts in our solutions and strive to support our clients by being the best at these operational tasks.”
Delegating such tasks to a third party can also reduce risk. As the Great Resignation saw people leave their jobs and take years of institutional knowledge, many firms realized third-party products and services might have longer staying power.
“In some cases, within firms, you may have a couple of people who know how everything works. This can cause problems when those people move on,” Nolan comments. “We have thousands of people who understand how our products work, and therefore having our firm as part of your ecosystem reduces risk from an operations perspective.”
Nicholas Nolan, Vice President of Product Management and Product Development at SS&C
Nicholas Nolan is the Vice President of Product Management and Product Development at SS&C Advent. He currently oversees all aspects of the development process and product management for SS&C Geneva. In addition, he works closely with hedge funds, assets managers, and fund administrators as they evaluate new operating models for middle and back office technology and services. Areas of expertise include complex derivatives, bank loans, credit and debt processing, reconciliation, and asset servicing. Prior to that, he worked at Fidelity Investments in collateral risk management. He is a graduate of Columbia University and currently lives in NYC with his wife and two children.
