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Unlocking the Potential of Quality Fund Administration with Digital Transformation

Danny Murphy, Head of Product

Quality Data Means a Quality Firm

Some years ago the alternative investment industry grew from its “wild west” beginnings into fully robust, highly regulated entities.  Success or failure of firms was often determined by internal infrastructure – the operations that allowed firms to function each trading day, regardless of portfolio and trading strategy or asset and investor classes. As firms grew in sophistication, size, and complexity (often consolidating), their operations assumed an ever more important role in viability and sustainability. Fund administrators are a critical component in this operational equation.

Simply put: Firms want to trust their data.  The quality of a firm depends in large part on the quality of its administrator.  And the quality of the administrator depends almost entirely on the quality of its data.  Data is the core of understanding what is happening in a fund firm and is the basis for better decisions. It is the fund administrator's obligation to deliver rapid, accurate, and reliable data consistently.

Fund administrators can be advantaged by the rapid digitalization of operations owing to advances in digital technology including: Cloud; intelligent process automation; and machine learning. Moving from manual processing, the entire scope of administrative and middle office functions including books and records, NAV calculations, the reconciliation lifecycle, shadow accounting, regulatory mandates, and reporting can realize reduction of costs (in time, labor, and money), fewererrors, no swivel effect, and increases in process efficiency and productivity.

The current trends influencing this digitalization and the benefits of migration to digitalization that C-Suite and Operations Executives must consider merit analysis. This migration need not be radical surgery on current operations but can be delivered in a consultative way and staged for modular deployment with minimal impact on ongoing daily operations.

At its core, or the hub of data operations for fund administrators, which is currently expensive and time consuming, are reconciliations.  Resolving both individual and systemic breaks is the start of the digitalization “quality" journey, and from there more operations can be transformed.

Why Quality Became the Key Issue and how it is Addressed

Quality data operations have a direct result on bottom line and technology now allows business managers direct input into technology: the result is better decision making. This is crucial for clients to make such timely and informed business decisions in a fast-paced, highly complex organization where the integrity of information is paramount.

Paradoxically, it is just through advances in technology that fund administrators and their end clients, the asset managers, can simultaneously reduce costs over time and increase quality, efficiency, and productivity, as well as reduces risk. In this context, CTOs and CFOs are increasingly attuned to the needs of business managers as drivers of the technology, and they now seek technologies that minimize the need for large technology investment in time and money and allow for greater design and implementation by the business side.

This environment came to be owing to a “perfect storm” of trends that are now the everyday environment for fund administrators.  Innovative and creative solutions to these challenges are being designed and implemented as firms move to digitalization, but the first task is to understand the environment itself. Over time, functions in this environment will be completely automated, moving to SaaS models.

The Information Tsunami

The number of data requirements and the use cases for data distribution mean that at some point no amount of human resource applied to it can keep pace.  There is a difference between a car with 200 horsepower and a human trying to control 200 horses. Everything, including quality, suffers. For example, in the OECD CRS, no amount of humans can keep up with the amount of data.


An increasing trend among fund administrators is consolidation.  Consequently, the need for efficiency in costs and the ability to interoperate between different systems has created a demand for a seamless, as opposed to manual solution.[1] Merging different systems together creates cost and inefficiency, and the sooner firm addresses and normalizes all data operations, the sooner they can reap the benefits of a single platform approach…with a single source of truth.

The Ability to Support Multiple Fund Structures

A myriad of considerations influence the decision to structure a fund in a particular way.  The iterations of these considerations build continuously and the ability to rapidly integrate and respond to different types of fund structures is key to the successful performance of the administrator.  Among the considerations are: legal structure; investment structure; partnership participation; jurisdiction; taxes; regulation, etc.  The ability to incorporate all these elements worldwide is necessary.

The Ability to Onboard Complex Asset Classes

When they began, hedge fund administration was pretty straightforward.  These investment theses and firms were largely vanilla (e.g. long-short). As the industry grew, firms took advantage of both portfolio and trading strategies worldwide that are very complicated, requiring millions of data points daily.  In such an operating environment the ability to seamlessly scale to and onboard these asset classes is a “must do.” Given the volume and complexity, downstream breaks are likely and need rapid reconciliation.

Global Operating Models/Regulatory Updates

Funds now operate 24/7 worldwide across asset classes and domiciles.  Each jurisdiction has its own mandatory tax, reporting and regulatory structures. For administrators, the ability to audit and control across all these parameters is required. As a simple example, in taxes the U.S. has FATCA and the OECD CRS affects 90 jurisdictions, each with its own nuance. New GL reporting Requirements and unanticipated ESG reflect a continuously evolving ecosystem.

Talent Acquisition/Retention

Firms are increasingly finding it difficult to acquire and retain talent.  Adding to the resourcing question is that firms no longer are seeking candidates tied to the current manual model, but need practitioners who can operate in the migration environment first and ultimately in the new digitized structure.

Transparency/Timely Reporting

From daily NAV to regulation, to investor accounts, access to and staying current with the demands of reporting is a tactical task with large strategic implications.  Investor relations, regulatory and tax timing and other reporting environments demand transparency in information.  Manual processes are time and labor consuming, and may lead to inaccuracies.  Automation and machine leading aid these processes.


Data quality is at the heart of immediate and sustained operations.  Making data less costly for the enterprise means automating current processes beyond manual capability – for reduced cost, labor, and risk.

[1] https://www.allvuesystems.com/resources/ultimate-list-of-fund-administration-mergers-and-acquisitions/

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