SS&C Advent Geneva® is used by 45 of the world’s largest fund administrators and is widely recognised as the industry leader when it comes to multi-asset class portfolio management and accounting. Geneva’s robust accounting engine supports everything from transaction processing and settlement, to accruals and income payments, as well as cash flow projections, valuations, amortisation, and reporting.
Geneva forms the backbone of accounting and portfolio management services within SS&C’s fund administration offering, SS&C GlobeOp, with more than 4,700 users leveraging the technology to manage more than 21,000 funds. SS&C GlobeOp is the world’s largest administrator with more than USD2 trillion in alternative assets under administration.
“We have supported credit, structured products and derivatives for quite some time,” says Nick Nolan, Vice President, Product Management and Solutions Consulting, SS&C Advent. “One of the trends we’ve definitely seen among credit managers is that, while some portion of their portfolios is comprised of syndicated loans, many of them are originating their own debt and coming up with their own bespoke terms for rules on cash flows.”
Managing interest payments from bank loans and self-originated loans, which may include unitranche, mezzanine, as well as senior secured loans, can be operationally complex. Typically, it requires being able to track myriad loans with scheduled versus ad hoc payment in kind (PIK), including term loans, delay draw loans, revolvers and loan total return swaps. If the portfolio is holding distressed loans, another operational consideration is effectively monitoring loan defaults and amortisation of loan discounts.
This can quickly become a tough task for any fund manager to handle, no matter how large and sophisticated their internal operations might be. Indeed, if the manager is relying on a series of legacy IT systems, this can lead to inefficient data management and reduce the capacity for the entire investment and back-office teams to view each moving element of the portfolio in a single, consolidated manner.
Public equity and fixed income markets are highly standardised as far as corporate actions and event processing. Reconciliations are a lot more straight forward, with custodians and prime brokers matching and triangulating data points. This is far from the case when venturing into private credit, syndicated loans, and other more esoteric assets, where there is no such thing as standard processes.
“Loans may need to be processed manually, terms can change rather quickly, you have considerations such as payment in kind, irregular cash flows and reconciliations which are much more challenging – we’ve seen clients struggle with this when there is a lack of transparency on data,” says Nolan, who continues:
“Whether it is the systems, the data, the reconciliation process… these are all areas where we work with our clients, through our technology and managed services, to support new workflows and asset classes.”
Investors will look in minute detail at the operational rigour any fund manager has in place when trading in highly illiquid asset classes. Managers should be aware of the need to respond to comprehensive due diligence questions, both on the operations side and the investment side. Those with sophisticated IT systems in place can take reassurance from the role these systems play in demonstrating the manager’s adroitness at managing every complexity across the investment lifecycle. It can, ultimately, determine the success of the fundraising process.
“Investors do demand more of their managers, in terms of transparency around how these funds are managed and accounted for,” comments Aani Nerlekar, Senior Director, Solutions Consulting. “There is more expectation from investors for look-through reporting and determining how much of each loan in the portfolio is being funded by an individual investor.”
Historically, managers running these types of closed-ended funds would provide quarterly reporting. Investors were, broadly, okay with that. However, given the evolution and continuing sophistication of private credit strategies, it has resulted in loan terms becoming more complex and, in turn, required the accounting aspect to advance. As well as wanting look-through capabilities to know exactly how their capital is being allocated, investors are seeking to better understand whether the returns being generated are meeting their expectations.
Tracking fees and waterfall calculations
One of the issues that managers must contend with, as interest in private credit grows, is the fact that more choice (for investors) means less opportunity to roll out standard, 2/20 fee structures. Investors are increasingly looking to negotiate individual fee terms with the manager, meaning that the accounting process has to factor in cash flow movements across multiple fee structures, and have the ability to calculate waterfall and carry structures based on custom terms.
The ability to track myriad cash flows is further accentuated by the fact that investors are also asking for more opt-ins and opt-outs.
Historically, investors automatically participated in every investment but now, because of customised terms, managers are giving investors the option to participate (or not) in a deal.
As a result, managers need to account for ‘deal by deal’ carry within the fund.
One other trend linked to the above point is ESG. Investors want to understand if the loan is being issued in a specific industry sector, before deciding whether to participate. This is becoming an important aspect of the investment landscape and something investors are increasingly asking for, adding an additional layer of complexity to the way private credit funds operate.
Advent Geneva’s accounting engine gives fund managers the flexibility to manage these increasingly customised fee structures. Geneva is able to report projected cash flows and receipts for user definable periods. Users can run daily P&L reports showing all income received, as well as amortise premium and discount amounts on the purchase of loan facilities. 
