3 indispensable third party services for hedge fund management firms
Posted: Feb 07, 2017
Hedge fund management is complex business. To deftly handle the vicissitudes in the world of fundraising, trading, and investments, managers need to religiously monitor trends, relate with their clients on a regular basis, and make swift, informed investment decisions. Today, helping them accomplish these tasks are third party asset servicing firms – outsourcing partners offering the service of their trained staff and the use of their custom solutions.
Here are the top services offered by these firms:
Risk management. Hedge funds deal in uncertainty, and in turning this uncertainty to the fund’s favor. It involves a careful study of odds, enabled by the aggregation of a comprehensive amount of data. After all, there is a wide range of risks to understand and evaluate: there is credit risk, liquidity risk, market risk, and regulatory risk. To be able to do this, one needs advanced solutions for risk measurement and modelling across different hedge fund categories. Following this step, a risk management specialist creates a risk report, one detailing the quantification of the risks and explaining its sources, while also offering sound advice based on the performed analysis.
Middle and back office outsourcing. Day-to-day middle and back office functions can take up so much of a hedge fund firm’s resources. The tedious middle and back office operations comprise such tasks as finance and accounting, tax reporting, accounts reconciliation, IT servicing, transaction records management, compliance, and payments, and they all require regular staff and technologies that are perhaps better utilized for core functions. Moreover, these are best handled using automation technologies that also lead to efficient, error-free processes.
Fund administration. Outsourcing partners also offer advanced solutions for fund administration. These should cover such tasks as fund accounting, trustee and fiduciary services, financial reporting, and regulatory reporting. The best-of-breed third party asset servicing firms invest in state-of-the-art portfolio management systems that are capable of data warehousing, quick calculations, and trends monitoring – with the relevant information dispensed in integrated and intuitive dashboards that may also be accessed 24 hours a day, 7 days a week. For funds with cross-country or international operations, these platforms are likewise ideal for collaboration with their multi-party viewing features.
Indeed, these third party services provide a systematic and efficient infrastructure for dealing with the challenges of hedge fund management of this era, while also promoting the transparent, accountable, and high-performing operation that today’s set of client-investors and regulatory authorities call for.
Leo Aranas is an online writer and blogger.