A first class systems capability for fund managers is crucial, but is it enough? by Charles Le CornuApril 12, 2016
This article was originally published on the Finance Publication Offshore website. To view the original article click here.
Fund managers have long debated the relative merits of building, buying or outsourcing fund administration technology. As managers face ever increasing demands from stakeholders and regulators, there is increasingly a requirement for sophisticated IT capability to cope with these demands, which are becoming progressively more technical and detailed.
One consequence is the outsourcing model is becoming increasingly appealing to fund managers, placing the onus for the delivery of IT solutions to meet these challenges firmly at the door of the fund administrator. No longer can there be a reliance on spread sheets and manual workarounds – fund administrators must be able to increase the levels of transparency and accuracy of fund information held on their systems, while also improving the way that investors and managers can gain access. Finding the right fund administrator is therefore of critical importance as the right provider will have robust, automated functionality with a proven track record in terms of delivery, adding genuine value to the overall service proposition. At Elian we are seeing a move towards ‘real time’ data access and have recently implemented dynamic portal technology to allow managers and investors seamless access to key reporting metrics at any time of day. We see this as a key consideration in the current market, highlighting the need for investment in systems that have the capability to drive continual improvements in functionality and data delivery.
It will therefore not be surprising to note that we see systems capability as a key consideration in terms of new business generation for a fund administrator. The speed with which administration businesses can implement new and improved technology solutions plays a key role in determining how effective fund administrators are at controlling risks, reducing costs and ultimately growing their business on a stable and highly-functioning platform that increasingly has multi-jurisdictional challenges to consider. At Elian, we have seen this first hand – as fund structuring becomes increasingly jurisdictionally diverse, fund managers need a partner with the capability to deliver key reporting metrics across multiple jurisdictions within challenging timeframes, regardless of complexity.
This has catalysed a significant uptick in due diligence requests from managers and investors looking into a fund administrator’s back-office processes and systems, to gain comfort that they are partnering with a fund administrator that is technology-focused and will be able to continually offer them timely reporting in an efficient manner. Due diligence questionnaires are no longer a box-ticking exercise, but a detailed inspection of an administrator’s capabilities. Simply put, managers must now demonstrably understand a lot more about a proposed fund administration partner, while investors now also do a lot of due diligence on their own behalf. Key areas of focus for investors and managers alike, include systems capability but also, critically, the control framework and operational processes that underpin it. By way of example requests for our ISAE 3402 reports, business continuity arrangements, key employee metrics and details of regulatory visits are all becoming core areas of all due diligence questionnaires, and are genuinely areas in which fund administration businesses can differentiate themselves from the competition in the current market.
Ultimately it is very easy to select a software provider that promises to deliver all of the above in terms of functionality and reporting capability. However, the modern world of fund administration is becoming increasingly competitive and having a good system is simply not enough. Maximising your systems capability is paramount to a high quality service proposition, however without a robust control framework and strong procedural structure supporting this systems capability, the offering loses some of its appeal. In today’s market fund managers and investors now expect both as standard, so excelling as a fund administrator in the current environment without both component parts will be very challenging indeed.
Charles Le Cornu
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