PARTNER CONTENT
From protecting and servicing assets to supporting data and compliance demands, Northern Trust Hedge Fund Services provides flexible and comprehensive solutions tailored to client needs. Jeff Boyd, Chief Executive Officer of Northern Trust Hedge Fund Services, chats to Hedgeweek about some of the current challenges and opportunities in the hedge fund sector…
Where do you see the most significant opportunities for growth in the coming year?
Recently, we’ve seen large managers growing larger through strong performance and a favourable capital allocation environment. At the same time, many are increasing their volumes or expanding the type and complexity of assets they manage. We’ve also seen a shift toward multi-manager funds as these platforms continue to perform well.
In a growth environment, the ability to scale while managing expenses is key to success. This is where Northern Trust Hedge Fund Services sees the greatest opportunity to help our clients going forward. We offer a nimble technology platform coupled with a team of experts that understand the industry and can help our clients get where they want to go.
Can you outline the most impactful drivers of client demand in the coming year?
Managers are seeking ways to attract clients while controlling expenses in a challenging economic environment. They must assess how best they are using their limited resources of both financial and human capital, and whether their technology is fit for purpose. For us, that’s resulted in more demand for our services.
There’s a significant shift in the industry tied to technology that goes beyond only trading to include regulatory reporting, trade settlement, the investor experience, and more. That’s where we step in and ease the burden for clients. We have the expertise and technology to support clients on a single platform with a single dataset across public, private and multi-managed structures.
What have been the biggest drivers of growth within your business?
Technology is reshaping the hedge fund landscape – the tools the industry uses are going to change very quickly over the next few years. Automation is a big part of that. From front-to-back office, managers are looking to automate many manual processes to make faster decisions and fewer errors.
For us, fund administration includes a variety of middle and back-office functions, which were historically managed in-house, but that operating model is changing. To support those processes, there needs to be constant investment in people, technology, and other capabilities that deliver efficiency.
Which are the most significant challenges in the hedge fund industry right now and how can they be best mitigated?
As mentioned, we’ve seen a trend of large managers growing, multi-manager platforms proliferating, and fewer fund launches in general. Coupled with these trends are expense pressures – investors are expecting certain levels of return, and expense control figures into that very acutely.
There’s also the ongoing challenge of changes to the market environment, whether that’s regulation like the SEC proposed private funds rule or market structure changes such as T+1 Settlement. Finally, the need for talent is very real – attracting and retaining the right talent can be a challenge.
To mitigate these challenges, managers are increasingly turning to service providers with the technology and tools to scale.
What opportunities do you see emerging for hedge fund firms in the near future?
Data is a manager’s greatest asset, and having the ability to unlock the value of that data is crucial – but it can also be a very expensive endeavour, and the in-house operating model is shifting. As firms continue to focus on scalability and growth, managers are increasingly outsourcing functions to maximize efficiency.
For example, we’ve been seeing several funds launching without a full accounting shadow, opting to rely on our ABOR instead. At Northern Trust, we’re constantly developing tools and interfaces to help clients manage their day-to-day processes.
Jeff Boyd, Chief Executive Officer, Northern Trust Hedge Fund Services
