As the hedge fund market becomes more crowded, fund managers are feeling the heat to not just deliver impressive returns but also to showcase robust operational skills. The growing complexity of these funds, combined with tighter regulations and shifting investor expectations, is pushing managers into a more demanding operational role. In this changing landscape, managers now must juggle the task of generating investment alpha while keeping their operations top-notch—a crucial factor in drawing and keeping investors’ capital.
By streamlining workflows, reinforcing data integrity, and ensuring compliance with regulations, partnering with the right fund administrator lets managers hone their investment strategies while boosting overall efficiency. Investors are increasingly focused on operational transparency and due diligence, making a well-managed operational setup as vital as strong investment outcomes. In today’s competitive scene, fund managers who prioritize operational prowess alongside investment success are in a better spot to flourish and provide sustainable value to their investors.
Achieving strong operational performance hinges on having a solid tech infrastructure. Essential features like automation, integration, accounting precision, processing speed, and data reliability depend heavily on a firm’s tech setup. It’s crucial to choose a platform that boasts a robust accounting system suited for complex strategies and fund structures, a dedicated investor accounting and servicing system, and an integrated investment and accounting book of record (IBOR/ABOR). Furthermore, a comprehensive global, multi-strategy, multi-currency trade order management system (OMS) is vital to support the full trade lifecycle.
However, the challenge lies in the high costs of implementing and maintaining such infrastructure in-house. This can strain IT resources and stifle growth. As a workaround, many hedge fund managers are turning to managed services and outsourcing/co-sourcing. This shift allows them to leverage cutting-edge technologies, enhancing agility and efficiency while simultaneously cutting down on operational overhead and risks.
Selecting the right strategic partner is key and demands careful consideration. Here’s what to look for:
1. Proven strategic partnerships with hedge funds – Opt for a partner that has consistently served clients of varying sizes and growth stages.
2. Comprehensive expertise – Seek a partner with seasoned teams well-versed in hedge fund accounting, NAV calculation, tax issues, and regulatory compliance.
3. Adaptable outsourcing model – The ideal partner offers flexibility to handle some workflows and processes in-house while outsourcing others.
4. A global footprint – Don’t confine yourself geographically. Choose a partner that supports growth across any global domicile.
5. Technological robustness – Your partner should offer solid solutions for hedge fund accounting, trading, and data management, with ongoing investments in new tech.
6. Streamlined onboarding and migration process – Select a partner that can set you up swiftly, backed by a proven methodology and a track record with hundreds of hedge funds.
To delve deeper into what makes an effective strategic partner for boosting operational efficiency, check out our “Competing to Win” whitepaper.
