Technology is the new battleground in the fund administration space, notes Global Custodian’s Fund Services Annual 2022. “Fund managers scrupulously assess a prospective provider’s services and functionalities – and if it’s not up to scratch, they will quite simply look elsewhere.”
Which makes picking a high-quality fund admin system that much more important to administrators.
What to look for
While having the right investor servicing software can make all the difference in winning or losing business, changing systems in the search for that technological edge is not a decision any firm takes lightly. The substantial data migration effort involved is often a big deterrent, with buy-in needed from many different stakeholders across the organisation.
So getting the decision right is vital.
The range and quality of system functionality on offer are, of course, a primary consideration. Current platform functionality gaps need to be filled and processes performed better.
As the Global Custodian Annual observes, with new fund structures, services and clients coming to the fore, “it’s imperative for providers to be able to facilitate those in order to maintain their position in the market.”
Surging flows to alternative assets, especially private capital, bring numerous P&L allocation, fee calculation and investor reporting idiosyncrasies. Investors seek rigorous performance and risk analytics (preferably in real time), with customised reports offering granular breakdowns of activity, positions and valuations so they can see how their money is managed. Growing regulatory demands require improved data accuracy, control and reporting responsiveness.
Is the functionality there to cope?
Functionality needs to be matched with performance and smooth client service delivery. Investor servicing must be fast, accurate and, wherever possible, digitalised if firms are to attract and retain client allocations. Sustained margin compression throughout the value chain adds to the focus on process and cost efficiency. That takes automation.
A sophisticated, integrated technology infrastructure – boasting both internal system automation and API-enabled connectivity to other solutions – enables more seamless data flows with a minimum of manual intervention. Errors are eliminated; speed and stability enhanced.
Fund administrators could support asset and client growth at one time by ramping up headcount. No longer.
Margin pressures continue to tighten the screw on admin cost bases. Finding and retaining talent in today’s tight labour markets is a major challenge in any case.
Automation – by reducing firms’ dependence on manual processes – allows for more unconstrained growth. Eradicating repetitive, menial tasks also helps create a working environment that staff want to be in.
But beware the illusion of automation. A system may look great. It may do everything that you want. But can it still perform at the same high level when much greater volumes are thrown at it?
Security and resilience
With cybersecurity breaches a huge and growing problem – and the associated financial and reputational risks getting bigger with it – the security protections that any investor servicing platform offers should be a prime consideration. Best practice security capabilities, such as dual key, maker/checker transaction controls, row-level security and tailored user permissions, are a must, all of which must be considered with any associated API functionality
Due diligence examinations are also increasingly focusing on fund administrators’ disaster recovery and business continuity planning protocols. Platform resilience and data redundancy are make or break factors.
And resilience questions are not limited to the software. The solution provider’s stability and strength are a further key factor in the decision.
Is the system vendor financially sound? Who are its clients? How many staff does it have? What expertise do they bring? A robust company with a proven track record and dedication to the business give administrators, and their investment manager clients and prospects, valuable peace of mind that the system will be supported for the long haul.
The vendor’s R&D commitment is another consideration. Is it devoting sizable resources to maintaining the software and exploring new innovations? What is the roadmap for its future development? Does that vision chime with yours? The system may serve your purposes now, but will it in two years, five or 10?
Changing or updating a fund administration system is a major investment, bringing upfront expense and disruption. But the benefits that the right solution can introduce far outweigh the cost.
So do your research. And pick well.
ABOUT DEEP POOL
Deep Pool is the #1 investor servicing and compliance solutions supplier, providing cutting-edge software and consulting services to the world’s leading fund administrators and asset managers. Our flexible solution suite, developed by an experienced team of accountants, business analysts and software engineers, supports offshore and onshore hedge funds, partnerships, private equity vehicles, retail funds and regulated financial firms. Deep Pool is a global organisation with offices in Dublin, Ireland, the United States, the Cayman Islands and Slovakia. For more information, visit: www.deep-pool.com.