[ A D V E R T O R I A L ]
Can old operating
models cope with
new technologies?
Alternative investment managers are having to weigh up the costs of carrying out an overhaul of
their internal technology to meet current regulatory and investor demands, or to outsource instead.
W
hen it comes to technology in
financial services, nobody wants
to face the ignominy of suffering a Kodak
moment, namely getting left behind when
all of those around you are aggressively
digitalising and future-proofing their
businesses. At the same time, very few
chief financial officers and chief oper-
ating officers will expressly endorse an
expensive technology project which does
not deliver immediate value. Innovation is
therefore something of a balancing act.
Representatives across the alternative
investment space gathered for a special
panel session in New York, hosted by FIS,
to look at how operating models for alter-
native fund managers are changing, how
their fund administrators are responding,
and where new technologies can help al-
leviate the pressure points for both sides.
Traditional fund houses are increas-
ingly moving into alternative products,
and the challenge many are facing is how
to update their operating models. The
technology that has underpinned their
traditional investments cannot, for exam-
ple, meet the complexity associated with
private equity. In addition, the traditional
outsourcing model is also under pressure
to adapt.
“The alternatives side is hyper complex;
in certain cases, they are almost seven
to 10 years behind the traditional side in
terms of sophistication of the investor
for things like dynamic reporting and
operational due diligence,” said Dan Hou-
40
Global Custodian
Winter 2018
lihan, head of asset servicing, Americas,
and regional head of global fund services,
Northern Trust.
Correctly valuing the assets held in a
real estate, private equity or infrastruc-
ture portfolio is a more time-consuming
and complex process than striking a NAV
(net asset value) for a money market
mutual fund. Furthermore, the client
and regulatory reporting obligations for
illiquid portfolios also diverge signifi-
cantly from those of more retail-focused
investment vehicles.
The need to meet regulatory obligations
and gain accurate NAV data is forcing a
new search for efficiencies.
“Operational efficiencies are a big driv-
er: how can we do things faster, how can
we close the books in one day versus two
weeks, how can we get information to our
partners so that they can use that infor-
mation to look at deals in different ways,”
explained Jason Donner, chief financial
officer, Veritas Capital, a private equity
“Technology is increasingly
becoming a bigger part of
the growth strategy and to
take on some of those more
mundane tasks so they can
focus on value.”
TONY CHUNG, HEAD OF ALTERNATIVE PRODUCT
MANAGEMENT AND STRATEGY, FIS
fund manager with $8.8 billion in assets
under management.
One way fund managers are looking to
gain efficiencies is through technology.
More and more are turning to technology
vendors and demanding new data prod-
ucts from their administrators to demon-
strate transparency to both their investors
and regulators.
“Technology is increasingly becoming a
bigger part of the growth strategy and to
take on some of the more mundane tasks
so they can focus on value,” said Tony
Chung, head of alternative product man-
agement and strategy, FIS. “As a solution
provider, clients want to learn more about
what we’re doing around the digital chan-
nel, analytics, and cognitive services.”
One strategic focus for alternative man-
agers is how can they automate as much
of their operating processes as they can,
especially when it comes to regulatory re-
porting, know-your-customer (KYC) and
anti-money laundering (AML), as well as
reconciliation and statement production.
One solution, the panel highlighted,
would be some sort of portal where fund