With institutional dollars now dominating the hedge fund industry, managers are facing far more stringent operational due diligence assessments. Pension funds and endowments are hiring dedicated ODD teams simply to go in and find reasons not to invest in managers. The bar, when it comes to raising capital, has never been higher.
Backstop Solutions Group has been a pioneer in providing a Software-as-a-service platform to the alternative funds industry since 2003, so as to help managers operate more efficiently. As such, it is able to sit in the middle and take a unique view on the way investor relations teams are coping with the onslaught of ODD requests, as well as maintain how information is shared with investors.
“In addition, we help investors create ODD processes and workflows within the same platform: they can track how many managers they’ve spoken with, how far along in the ODD process they are, how managers are being rated, etc,” explains Chris DeNigris (pictured), Global Marketing Manager at Backstop.
By offering software solutions that span investor relations, CRM, sales & marketing and investor reporting, Backstop is empowering hedge fund managers to develop more efficient workflows that stand up to scrutiny when investors conduct operational due diligence. According to DeNigris, IR teams are taking a more proactive stance, and they are using Backstop to more effectively manage the documentation process.
This extends beyond merely documentation and having efficient CRM workflows in place. It’s about presenting the fund as one that is investor friendly. This can be a critical factor, especially for start-ups and emerging managers.
“Investors are now asking for more information and additional transparency, and it’s imperative for us to not only provide them with timely and accurate information, but to also start anticipating what they might need or ask for,” says Megan Cruse, Director, Altum Capital Management, LLC, a New York-based hedge fund that focuses on opportunistic distressed structured credit. “Seven to ten years ago most funds didn’t even have websites. But today, our marketing and IR team uses Backstop’s web portals and other technology tools so we can be more proactive than reactive, and provide our investors with the most up-to-date information and reports.”
That all relates back to one of the main objectives Backstop has for its clients: to help them work more efficiently and increase productivity. In fact, “Work Smarter” is the theme of Backstop’s customer conference in Chicago on 10th and 11th June. As firms, across the entire financial sector, look to make better use of their time, the cloud is really changing the game.
“We have extensive functionality built into the cloud to streamline workflows and drive business efficiencies. For hedge funds specifically, it’s more about how to improve their capital raising capabilities. We did a survey of our hedge fund clients, and on average they’ve seen a 52 per cent increase in AUM since implementing our system,” confirms DeNigris.
The inference to draw here is that managers are taking a systematic process to raising capital and recognise the need to have the right systems in place.
“We continue to make enhancements to the system to help our clients work more efficiently. For example, we’ve enhanced our activity search function so that people can find what they are looking for – investor emails, documents, etc – much faster in the system; it’s akin to having Google search in the platform,” concludes DeNigris.