At this summer’s Information Management Network (IMN) 24th Annual U.S. Real Estate Opportunity & Private Fund Investing Forum, Todd Rosenzweig, Regional Vice President at JTC, gave his views on the often overlooked but essential fund administration knowledge. Here, Todd shares what he sees as the biggest eye openers and surprises.
Increasing numbers of fund managers are choosing to outsource all or part of their administration to third party specialists. A recent survey of 200 asset managers and owners reveals that more than three-quarters (76%) have already outsourced back office services to some extent. Almost half (46%) may expand outsourcing further, and 16% that have in house back offices are considering outsourcing them1.
The motivation to outsource varies from firm to firm and there is plenty for managers to think about when they are starting the process or switching from an incumbent fund administrator.
Making the move
There are myriad reasons for outsourcing fund administration, but today’s competitive hiring environment is a key driver.
It is becoming more challenging for fund managers to find the right people to run their middle and back offices. And as the Great Resignation trend continues, replacing outgoing specialists can be problematic.
Further, incumbent technology may no longer be able to keep pace with the regulatory and reporting demands firms face. For example, relying on Excel and other more manual systems may leave firms vulnerable to inefficiencies.
And as regulatory demands increase, often with little standardization between the information demanded, fund administrators offer an opportunity for managers to focus on their core business rather than meeting reporting requirements.
Ultimately, switching to a dedicated fund administrator can alleviate both the human and technological resource constraints.
First forays
Working successfully with a fund administrator is about building strong relationships between all the parties involved.
It is often a surprise to prospective clients when they learn the depth and scope of the work a fund administrator can cover. We can take responsibility for much of the middle and back office functions, which means it is important to think about which areas you want to outsource.
We work with clients from the beginning by reviewing documents and getting to grips with the strategy. Those initial conversations can be eye-opening for both the fund administrator and the client in terms of deciding where it makes sense for us to support them, and where we can help to refer to other providers.
When talking to a prospective client, we start the before process by finding out which legal firm and auditors they work with, and offer recommendations for additional support where needed.
Pastures new
As asset managers’ priorities change and they adjust to new investment landscapes and regulatory demands, expectations of their administrators inevitably shift.
This may mean seeking out a new fund administrator or transiting from an in-house team to an outsourced model.
Changing fund administrator is a significant decision and needs to be handled carefully.
The starting point for the client is to ask, ‘what am I missing from my administrator that I need today and in the future?’.
Firms need to be sure that their new provider has the bandwidth and requisite experience to manage their strategy, especially as it evolves over the coming years.
It is also important not to let price be the sole deciding factor when making a change. Fund managers may be surprised to learn that just because a fund administrator looks reasonable on price, they may not offer good value.
Technological capability
Whether starting from scratch or changing provider, clients need to be sure their fund administrator has the right technological capability.
It may be surprising to learn that clients are no longer beholden to the systems and processes offered by their fund administrator and there is a greater willingness for providers to be flexible.
Increasingly organisations are outsourcing their fund administration to get a better handle of their data, both in terms of collation and analysis.
Rather than asking fund administrators to provide the technology, clients want providers to plug in to their existing systems so that they can own their own data and use it to drive the business and improve operational efficiencies.
Today’s fund administrators need to be adaptable in the technologies they work with and be willing to support clients in harnessing data effectively.
The Artificial intelligence (AI) evolution is central in achieving that goal.
While the new technology is often viewed as an opportunity to replace people, in fund administration AI is about improving data management and reporting; using it to summarize information and to enhance analysis.
We use the technology to help teams solve problems more effectively and deliver better customer service.
Evolving solutions
The world of fund administration is constantly evolving.
We are focused on how we can harmonize reporting, operations, and processes globally. We have clients developing propositions in Europe and they need support in standardizing their reporting across different jurisdictions.
Simultaneously we are reducing processing times; we want to report our data faster than ever done before. That means using the technology more effectively and continuing work closely with clients to get the best outcomes.
