What back office solutions do in the world of asset management

In the investment and securities business, there is a front office, a middle office, and a back office. And it is the back office that is mainly in charge of that essential, broad-based task known as fund administration. However, there are more and more fund managers and other executives who handle large amounts of investments who have their back office solutions handled by third-party asset servicing/management companies. But what specifically does a this do in an asset management firm?

Accounting and the calculation of net asset values

Not everybody is skilled in, or likes dealing with numbers. But back office employees have to at least be very good with numbers, and they make use of this skill, together with the best-of-breed technology boasted of by the asset management firms they work for, to handle all accounting and valuation tasks. Regardless of the size of a hedge fund’s portfolio, these workers have to calculate net asset values, as well as reconcile data by comparing one source against another. An example of the latter would be comparing a broker’s statements with that of the investment manager.

Ensuring legality and compliance

There is a whole bunch of regulations governing hedge funds and their respective portfolios. These include the Anti-Money Laundering Act; the Patriot Act; "Know Your Customer" policies and compliance with the AIFMD and FATCA. Those are just a few of the essential regulations that fund managers have to keep in mind, and it is the job of the back office to ensure compliance in that regard. Given the heightened scrutiny on different investment vehicles, it takes a good and solid back office to make sure everything is in order in terms of federal and state regulations alike.

Leveraging modern technology

The two back office roles mentioned above are the most important ones, but those and other responsibilities are now made easier through the use of bleeding-edge, cloud-based technology. There are a lot of third-party solutions that make use of this tech, and that helps make it easier and more convenient for fund managers to access all the information they need to know about their portfolios. Companies that offer these solutions also need to have an experienced stable of employees capable of providing personalized care to fund managers and other clients, given the highly-sensitive nature of their job, and the fact they manage great sums of money each working day.

Leo Aranas is an online writer and blogger.