Hedge funds: Surviving market uncertainty through asset servicing

Across the globe, the market for hedge funds faces uncertainties due to such political and economic developments as Britain’s exit from the European Union, the unexpected victory of Donald Trump in the United States, and across Europe, a fear of the rise of populist, authoritarian, and anti-immigration regimes, and the crises in the governments of Middle East and Africa.

Add to this the increasing fund regulation by the industry and the governments and a renewed emphasis on belt-tightening measures as well as making stable gains among investors, and we have a pool of fund managers who are struggling to address the oftentimes contradicting demands of various stakeholders.

Enter asset servicing firms. In recent years, these third party service providers have quickly grown in number, offering much-needed support for middle and back office operations. With their help, hedge funds in the United States and abroad are able to respond to an increased demand for practices that promote transparency and accountability, as well as good fund performance.

Asset servicing firms play a crucial role in fund administration, data management, compliance management, and the day-to-day tasks of accounting, trade reconciliation, and NAV computation, among other functions that are time-consuming and resource-intensive.

The best of these companies maintain an advanced technology infrastructure that can support the complex reportorial and corporate governance requirements of the hedge fund management business. They prepare financial statements and tax reports for submission as well as safekeeping. They religiously monitor hedge fund trends, taking note of news about emerging markets as well as political and economic upheavals that may soon affect the industry. They also keep tabs on new policies in local and foreign markets, Finally, they retain a pool of experienced professionals that can take on all these functions.

By so doing, asset servicing firms relieve fund managers of complicated, time-consuming tasks, allowing them to focus on fostering good relationships with client-investors and improving the company’s overall organizational capabilities. They also offer timely and accurate business intelligence, enabling data analysis that will be the basis of crucial investment decisions in the competitive world of hedge funds. More importantly, they offer more efficient procedures, and provide a more cost-effective way to accomplish all management functions.

Truly, in the face of the many changes and uncertainties that mark this particular era of portfolio management, asset servicing companies can serve as the backbone of a hedge fund, and their assistance, an indispensable element of a successful fund operation.