{"id":24034,"date":"2011-08-11T10:05:24","date_gmt":"2011-08-11T14:05:24","guid":{"rendered":"http:\/\/www.hedgeco.net\/news\/?p=24034"},"modified":"2011-08-11T10:05:24","modified_gmt":"2011-08-11T14:05:24","slug":"crederian-alert-what-does-it-mean-for-investment-managers","status":"publish","type":"post","link":"https:\/\/hedgeco.net\/news\/08\/2011\/crederian-alert-what-does-it-mean-for-investment-managers.html","title":{"rendered":"CREDERIAN ALERT: What Does It Mean for Investment Managers?"},"content":{"rendered":"<p>This                   article is the first in a series of educational topics                   to be delivered to you from Crederian Fund Services.                   For further information or to discuss this topic,                   contact Eugene P. Grace, Crederian Fund Services, at <a href=\"mailto:eugene.grace@crederian.com\">eugene.grace@crederian.com<\/a>.<\/p>\n<p><strong>CREDERIAN                     ALERT: What Does It Mean for Investment Managers?<\/strong><\/p>\n<p><strong>System                     Integration and Fund Administration<\/strong><\/p>\n<p>Technology is a critical driver of the financial                   services industry. Better technology tools correlate                   with better financial products and services.                   Technology shapes the scope and quality of financial                   services; and system integration is a critical element                   of technology?enabled                   services. System integration represents a significant                   leap forward in the on?going                   technological evolution of the industry. System                   integration enables:<\/p>\n<ul>\n<li>greater                     data integrity<\/li>\n<li>simplified                     workflows<\/li>\n<li>consistent,                     accurate results<\/li>\n<li>enhanced                     ease of use<\/li>\n<li>reduced                     turn?around                     times<\/li>\n<\/ul>\n<p>Below,                   we present a discussion of the benefits of system                   integration in the context of fund administration                   services. This review may be useful to you when                   selecting a fund administration agent. We look at the                   concept of system integration, generally, and the                   added value of integration within a fund                   administration system. We also include a few real?life                   examples of how system integration enabled client                   success.<\/p>\n<p><strong><em>Please                       explain the concept of \u201cintegration\u201d<\/em><\/strong><\/p>\n<p>Integration refers to the degree to which your funds\u2019                   information technology resources work together or with                   third parties. IT management will talk in terms of                   partial, full or comprehensive integration of the                   various components of their IT platform. The concept                   of straight?through?processing                   (\u201cSTP\u201d) has been part of the discussion for many                   years. The goal of system integration or STP is to                   minimize human intervention in the data input process                   and leverage a system\u2019s architectural design to feed                   various system applications which might include,                   portfolio management, general ledger, partner data and                   reporting, allocations and back?end                   web portal access. Acceptance of data into an IT                   environment becomes a matter of critical concern and                   should only be allowed from sources within one\u2019s own                   organization or from highly trusted external sources.                   The reduction or elimination of re?keying                   of data has been a significant objective in reducing                   operator error, reducing risks, enhancing operational                   efficiencies, increasing the speed of producing usable                   output and reducing overall operating expense. The                   goal is to use technology resources to manipulate data                   in accordance with processes that have been subject to                   strenuous review and approval procedures thereby                   assuring a high degree of certainty in producing                   consistent, accurate results.<\/p>\n<p><strong><em>Please                       comment on the extent of technological integration                       among fund administrators<\/em><\/strong><\/p>\n<p>Previously, a significant number of investment                   managers have opted for an \u201cadmin lite\u201d approach to                   their fund services, whether performed internally or                   on an outsourced basis. The \u201cAdmin Lite\u201d servicer uses                   various systems to perform specific tasks without                   tying the systems together into a coherent network.                   This style necessitates significant human intervention                   in moving data from one system to another, requiring                   re?keying                   of data, making the process highly prone to error.                   With \u201cadmin lite\u201d, there is a need for time?consuming                   review protocols to assure the accuracy of data                   following each step. In this paradigm, data does not                   flow from one system component to another; data is re?entered                   as required for each element of the fund accounting,                   administration and investor reporting cycles. This                   approach fails to achieve the benefits of available                   technology. This operating model greatly increases the                   probability of error at multiple points with a                   heightened likelihood of exposing operational                   inadequacies to investors.<\/p>\n<p>Some fund administrators, such as Crederian, utilize                   technology platforms that seek to achieve a high level                   of integration among the various service elements of                   the fund administration process. This is not common,                   even among full?administration                   firms. With greater system integration, workflows can                   be streamlined as data flows between the various                   components of the system without manual intervention.                   This level of system integration greatly enhances data                   integrity and the speed with which required tasks may                   be performed.<\/p>\n<p><strong><em>Aren\u2019t                       all systems integrated to some degree?<\/em><\/strong><\/p>\n<p>The answer may be that a system is integrated within                   itself, but a single system may not have the                   capability to perform all the functions necessary for                   fund administration. As a result, the fund manager or                   administrator may be moving data from the trading                   system to the accounting system and again to the                   reporting system through multiple re?entry                   of data. The data is not flowing seamlessly; rather it                   is being re?created                   through the repeated re?posting                   of the same information with the almost inevitable by?product                   of data error. Think of a house where water was once                   received by pump in the kitchen but needed to be                   carried by hand to other areas for various uses. The                   chance for spillage or leakage is easy to understand                   with resulting inconvenience or even damage. It is                   important for managers to determine whether their                   operating infrastructure enables the smooth flow of                   data not only within a function (trading, accounting,                   investor reporting, web portal) but among all the                   necessary elements of the fund\u2019s operational platform.<\/p>\n<p><strong><em>Doesn\u2019t                       \u201cAdmin Lite\u201d reduce fund servicing costs?<\/em><\/strong><\/p>\n<p>There is a belief that the use of \u201cadmin lite\u201d will                   lower the overall costs for investment managers,                   especially those in the start?up                   phase. However, the \u201cadmin lite\u201d approach may result                   in the significant expenditure of time on non?revenue                   producing activities. \u201cAdmin Lite\u201d approach usually                   results in higher audit and tax return preparation                   fees. This approach forces the auditors and tax                   preparers to perform additional interim testing. The                   additional testing is required as a result of control                   point gaps and the data supplied to them may not be                   sufficient to complete the audit or tax returns.                   Managers also need to consider the implicit                   opportunity costs embedded in their operational                   structure when deciding to pursue an \u201cadmin lite\u201d                   approach to fund servicing. Such implicit costs                   include distraction from the manager\u2019s core business                   objective of attracting new clients and raising                   additional assets.<\/p>\n<p><strong><em>Can\u2019t                       we migrate from an \u201cAdmin Lite\u201d approach to a more                       full<\/em><\/strong><strong><em>?<\/em><\/strong><strong><em>service                       platform after we achieve our goal of asset                       growth?<\/em><\/strong><\/p>\n<p>It is understandable for fund managers to think that                   they can begin with an \u201cadmin lite\u201d approach and then                   upgrade to a more complete service environment at a                   later time. The focus of this analysis is almost                   always the direct cost of the Administrator. However,                   in order for this analysis to be complete, managers                   need to add the cost of time spent on managing the                   \u201cadmin lite\u201d agent, assuring data integrity, reviewing                   the quality of investor communication and the cost of                   potentially losing a client due to foreseeable                   administrative issues, such as incomplete or incorrect                   information. With \u201cadmin lite,\u201d managers are accepting                   a predictable level of investor?visible                   error for lower costs. In essence, it becomes a matter                   of time or chance as to whether known system                   inadequacies will result in more pain and cost than                   the manager would willing to accept.<\/p>\n<p>The \u201cadmin lite\u201d approach is by definition not                   sustainable. With projected asset growth, the                   shortcomings of the \u201cadmin lite\u201d approach add an ever?increasing                   amount of strain on the servicing side of the                   operations with almost certain impact on the asset                   gathering side of the business. Loss of an investor or                   prospect due to system or personnel inadequacies on                   the servicing side should be unacceptable to every                   manager. A more desirable approach would be for                   managers to work with a full service administrator,                   such as Crederian, that is willing to provide fee                   concessions for stated periods to enable the manager                   to focus on and ramp up asset growth.<\/p>\n<p><strong><em>Please                       specify the functionality requirements of a full<\/em><\/strong><strong><em>?<\/em><\/strong><strong><em>service                       fund administration system<\/em><\/strong><\/p>\n<ul>\n<li>Fully?integrated                     among portfolio, investor data and activity, general                     ledger, allocations and reporting functions<\/li>\n<li>Auto?integration                     with prime brokers and OMS (Order Management                     Systems) to minimize manual input of data<\/li>\n<li>Excel                     template loaders to allow for easy conversion of tax                     lot and investor information<\/li>\n<li>Automated,                     third?party                     pricing and corporate action to ensure accuracy<\/li>\n<li>Real?time                     processing with no overnight batch required<\/li>\n<li>Document                     Manager to allow for the posting of organizational                     documents, sub docs and Manager communications<\/li>\n<li>Customized                     PDF and Excel reporting<\/li>\n<li>Back?end                     investor login to allow Manager, Partners and                     Investment Advisors access to reporting and                     documents<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><strong><em>Please                       provide case studies that highlight the benefits                       of an integrated fund administration system<\/em><\/strong><\/p>\n<p><strong>Case                       Study #1<\/strong><\/p>\n<p><strong><em>Client                       was tired of performing all the accounting and                       investor services functions in<\/em><\/strong><strong><em>?<\/em><\/strong><strong><em>house                       on Excel using the prime broker statements. The                       manual errors were causing the fund to lose                       investments from high net worth and institutional                       clients.<\/em><\/strong><\/p>\n<p>Client selected Crederian to perform all accounting                   and investor services functions for the fund using a                   fully?integrated                   accounting\/investor services solution that allows for                   the portfolio, investor data and activity, general                   ledger, allocations and reporting to all come from one                   system. As a result, the client was able to save on                   internal costs associated with back?office                   operations and were able to retain and raise                   additional capital due to strengthening of the fund\u2019s                   administrative services and due diligence.                   Additionally, Crederian\u2019s technology solution and                   operational controls are both SAS 70 certified.<\/p>\n<p><strong>Case                     Study #2<\/strong><\/p>\n<p><strong><em>Client                       wanted more reliable controls concerning the                       release of partner statements. The fund manager                       had experienced client dissatisfaction resulting                       from internal operations personnel mailing                       statements to the wrong partners.<\/em><\/strong><\/p>\n<p>Crederian was able to generate and e?mail                   partner statements directly from our fully?integrated                   system with no manual intervention in the process.<\/p>\n<p><strong>Case                     Study #3<\/strong><\/p>\n<p><strong><em>Client                       was relying exclusively on the prime broker for                       securities valuations and corporate actions.                       Client wanted to enhance the reliability of this                       information by using a more independent source.<\/em><\/strong><\/p>\n<p>Crederian provided pricing and corporate actions from                   IDC, an independent, third party source. With IDC\u2019s                   auto?feed                   this data flowed directly into Crederian\u2019s accounting                   solution with no manual intervention. The IDC data                   values the portfolio on a daily basis and books                   corporate actions on ex?date.<\/p>\n<p><strong>Case                     Study #4<\/strong><\/p>\n<p><strong><em>Start<\/em><\/strong><strong><em>?<\/em><\/strong><strong><em>up                       fund was not sure if they should go with an                       Administrator who performs \u201cAdmin Lite\u201d or a full<\/em><\/strong><strong><em>?<\/em><\/strong><strong><em>service                       Administrator. Focus was on direct cost.<\/em><\/strong><\/p>\n<p>Crederian provided fee concessions in the early stages                   to enable asset growth. Crederian\u2019s technology                   platform enabled integration among the various                   elements of its fully featured fund administration                   system as well as with order management systems, prime                   brokers and custodians with limited manual                   intervention to assure accuracy.<\/p>\n<p>By using a full service administrator, such as                   Crederian, the fund will have a stronger operational                   base and will be more fully protected against missed                   trades, missed dividends, inaccurate partner                   statements and incorrect securities valuations.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This article is the first in a series of educational topics to be delivered to you from Crederian Fund Services. For further information or to discuss this topic, contact Eugene P. Grace, Crederian Fund Services, at eugene.grace@crederian.com. CREDERIAN ALERT: What [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-24034","post","type-post","status-publish","format-standard","hentry","category-hedgeco-news"],"_links":{"self":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/24034","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/comments?post=24034"}],"version-history":[{"count":2,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/24034\/revisions"}],"predecessor-version":[{"id":24036,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/24034\/revisions\/24036"}],"wp:attachment":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/media?parent=24034"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/categories?post=24034"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/tags?post=24034"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}