What Keeps Alternative Investment Professionals Up at Night?


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The profile of alternative investments like hedge funds, private equity funds and real estate funds has risen dramatically in just the past five years, with a growing number of investors dipping their toes into this particular category. And this interest has pushed this once obscure class to become the fastest growing category of investments, with $18 trillion projected to flow into it by 2020.

This elevated importance has raised the stakes and pressure for key industry stakeholders, with the most obvious being the private fund managers that run the aforementioned alternative investments. However, our perspective is that the stakeholder most strongly feeling this pressure is the fund administrator that services both the private fund manager and the investor.

We find that fund administrators are under-appreciated and under-estimated for the critically important role that they play in the alternative investment industry. They are often the primary source of information and operations for the fund manager, and they are typically the conduit for the investor to be able to see and receive key information about the fund.

As these pressures continue to mount, fund administrators in particular are faced with the daunting task of keeping up with the rapidly changing landscape of the alternative investment industry, and then figuring out what they can do to succeed.

Let’s break this dynamic down into two areas:

Key Challenge
Regulatory and operational concerns have skyrocketed from being nearly non-existent just a few years ago to becoming the primary concern and challenge for both fund administrators and private fund managers. It is literally keeping these stakeholders up at night.

Multiple industry reports point to this, but here is a chart that comes from Linedata’s 2016 Global Asset Management & Administration Survey, which shows just how serious these concerns are:

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Just to reaffirm the impact of regulatory and operational concerns, notice that regulation and operations were considered more important than other seemingly critical concerns like fund performance and investor/client relations!

What can fund administrators do to succeed?

  1. Attack Regulatory and Operational Concerns: Fund administrators should look to technology to help them tackle the regulatory and operational concerns that are keeping them up at night. Begin by attacking regulatory and operational concerns. Technology can help a fund administrator better adapt and more quickly comply with new regulatory and compliance requirements. Progressive software solutions can help a fund administrator “project-ize” regulatory compliance by providing intuitive and transparent workflows that help them better collaborate with clients and investors, assigning a particular task to a particular person, and tracking the completion of each step in a way that is visible to all participants. Email notifications at appropriate moments along the way prompt the assigned person to know that an action needs to be taken. This type of digital collaboration greatly reduces operational efficiencies, including the back-and-forth communication that currently happens via email, electronic file folder systems and phone calls.
  2. Differentiate Themselves Through Client Service: Technology can also help a fund administrator dramatically improve its service to both its fund manager clients, as well as to the investors of its clients. Intuitive portals for both clients and investors that provide useful performance dashboards, as well as easy-to-use digital document storage and sharing, go a long way towards improving the fund administrator’s quality of service.

What’s keeping fund administrators up at night? It’s the fear of the unknown with the ever-increasing regulatory and operational pressures, as well as the fear of losing their clients and investors as a result of poor service.

Using modern technology can be the answer to a good night’s sleep for fund administrators. There’s a quote from the Linedata report that put it best: “Now is the time to embrace digitization to gain competitive advantage in this dynamic market.”