Working with an outsourcing partner in hedge fund administration
Posted by Louie Drake on Wednesday, November 16, 2016 Under: Finance
Hedge fund administration is at the core of any hedge fund operations. But at the same time, much of it can be turned over – and wisely so, most of the time – to the hands of a third party. How does a fund manager ensure that the partnership with an asset servicing firm will work?
Here are a few guidelines when working with an outsourcing partner:
Clearly stipulate the functions to be covered. Hedge fund administration should involve the following functions: Cash and trade reconciliation, NAV computations, independent asset valuation, anti-money laundering monitoring, investor statement preparation and filing, and profit and loss reporting. Depending on the load, requirements, and budget of the hedge funds, some of these functions can be covered in the agreement or not, and conducted based on a particular schedule. What is important is for the terms to be clearly laid out, with a calendar, a framework to be followed, as well as all the activities to be conducted.
Establish a single point of contact for each party. Communication is the foundation of any relationship. There must be a commitment towards a regular and detailed conversation between the hedge fund firm and the outsourcing firm, coursed through a single channel, to avoid any form of confusion. Collaborative efforts may be promoted through multi-stakeholder platforms as enabled by the top-tier portfolio management systems, but bigger decisions should go through the proper avenues, and ultimately communicated via the point of contact.
Evolve together over the course of the partnership. A good partnership with an asset servicing firm entails a two-way evolution, and not just one party’s performance of a service for another. During the course of the partnership, both the hedge fund firm and the service provider should experience growth as an organization, through constant feedbacking and improvement of processes. In the face of new or tightened regulations in the industry, this mindset will allow companies and their outsourcing partner to smoothly manage stringent policies such as the the Foreign Account Tax Compliance Act (FATCA), the Dodd-Frank Act, Alternative Investment Fund Manager’s Directive (AIFMD). Feedbacking will also greatly help in terms of developing solutions whose features respond to the needs of the industry.
The key is to find an asset servicing firm that truly understands the changing business landscape for companies in the investments and securities sector, and is committed to delivering the hedge fund administration needs of its partner.
Here are a few guidelines when working with an outsourcing partner:
Clearly stipulate the functions to be covered. Hedge fund administration should involve the following functions: Cash and trade reconciliation, NAV computations, independent asset valuation, anti-money laundering monitoring, investor statement preparation and filing, and profit and loss reporting. Depending on the load, requirements, and budget of the hedge funds, some of these functions can be covered in the agreement or not, and conducted based on a particular schedule. What is important is for the terms to be clearly laid out, with a calendar, a framework to be followed, as well as all the activities to be conducted.
Establish a single point of contact for each party. Communication is the foundation of any relationship. There must be a commitment towards a regular and detailed conversation between the hedge fund firm and the outsourcing firm, coursed through a single channel, to avoid any form of confusion. Collaborative efforts may be promoted through multi-stakeholder platforms as enabled by the top-tier portfolio management systems, but bigger decisions should go through the proper avenues, and ultimately communicated via the point of contact.
Evolve together over the course of the partnership. A good partnership with an asset servicing firm entails a two-way evolution, and not just one party’s performance of a service for another. During the course of the partnership, both the hedge fund firm and the service provider should experience growth as an organization, through constant feedbacking and improvement of processes. In the face of new or tightened regulations in the industry, this mindset will allow companies and their outsourcing partner to smoothly manage stringent policies such as the the Foreign Account Tax Compliance Act (FATCA), the Dodd-Frank Act, Alternative Investment Fund Manager’s Directive (AIFMD). Feedbacking will also greatly help in terms of developing solutions whose features respond to the needs of the industry.
The key is to find an asset servicing firm that truly understands the changing business landscape for companies in the investments and securities sector, and is committed to delivering the hedge fund administration needs of its partner.
In : Finance
