What is Hedge Fund?
Hedge fund is a fancy jargon for an investment partnership. This partnership involves the union of a fund manager, which is often called as the general partner, and the hedge fund investors also known as the limited partners. The limited partners contribute the money while the general partner manages the pooled funds and employs different strategies with the goal of generating active return of investment, which is called Alpha. The latter serves as a measure or gauge of investment performance relative to a market index or benchmark. The total assets under management for the hedge fund industry rose to $4.81 trillion in 2018.
Outsourcing is the new Norm
The alternative investment industry, such as the hedge fund management, has increasingly turned to outsourced service providers to fulfill non-investment related business functions. Current market data and evolving industry best practices suggest that outsourcing is the new norm.
With the ever growing complexity in hedge fund regulatory requirements and rising in-house fund operation costs, hedge fund managers now turn to outsourcing as a more viable strategic solution. Outsourcing has enabled hedge fund administrators to reap the benefits of economies of scale by taking advantage of high-quality specialized services at significantly lower costs in contrast to hiring in-house employees.
Moreover, investors now require improved transparency to have better understanding of the investments made by their hedge fund managers and assess their liquidity. Investors who want protection against fraud activities now require a third party outsourced provider to verify the net asset value (NAV) of their funds to validate valuation.
With the current strong investment market environment, hedge fund administrators have increasingly relied on outsourced service providers to cover various middle and back office business functions, such as Portfolio Operations, Risk Management, Fund Accounting, Transaction Processing, Financial Management Reports, and more.
How Can Outsourcing Benefit Hedge Fund Providers?
Through outsourcing, hedge fund administrators and alternative asset managers can focus on their core competencies, such as asset gathering, investment trading, and portfolio management. Delegating operational functions to an expert outsourced partner can lead to a significant reduction in operating risks and costs and a higher degree of transparency into the management of the hedge funds.
The following are some of the primary benefits of outsourcing hedge fund management operations:
1. Excellent Support from Financial and Accounting Experts
Accurate monitoring of accounting processes and compiling regulatory financial reports are necessary in improving hedge fund performance and ensuring transparency for your investors. Maintaining voluminous financial data and converting them into concise business targets can consume your valuable time and cost you a lot of money. You need a trusted expert in financial and accounting services that can help you manage your fund effectively.
Outsourcing your hedge fund administration services and accounting tasks will ensure accurate financial records and minimal resources spent on overhead costs. You can rest assured that your fund is always compliant with regulatory requirements for both onshore and offshore alternative investments.
2. Robust Portfolio Management System
A trusted and reliable portfolio management system should be at the core of the outsourced solutions that can help you make portfolio investment decisions intuitively and efficiently. This includes in-depth hedge fund portfolio analysis and extensive general ledger reporting.
Furthermore, the accurate and timely generation of your business’ Net Asset Value (NAV) facilitates in proper valuation of your assets to give you an objective basis for your investment decision-making and serves as a vital tool for investors to gain a good grasp of your business.
3. Efficient Profit and Loss Management
With the expansion of hedge fund management services, profitability is an important element that helps a business gain a strong market share. As an organization, strategically managing your profit and loss requirements can mean a stable economic future for your company.
On top of accounting expertise, administrators need to get industry professionals who can effectively function as an extension of the fund manager’s team. The outsourced hedge fund service provider can help you manage your exposure to the different kinds of risk in business including credit, market, currency, shape, volatility, liquidity, sector, and inflation risk. You don’t have to go through the time consuming and complex task of profit and loss management day in and day out. Engaging an experienced hedge fund accounting outsourcing provider can take care of that task for you.
4. Customized and Integrated Capabilities
Hedge fund managers should look for a mid-office outsourced service provider that has both the technical capability and the client-focused mentality to accommodate their unique customer requirements and be able to protect the confidentiality of each investor.
An effective outsourcing provider should offer customized scalable solutions that meet your alternative investment needs and give competitive advantage towards business growth. It should have the qualified staff and integrated resource capabilities to guarantee business continuity, knowledge transfer, backup personnel, and employee succession. Having a global network that covers multiple time zones that can support 24-hour operation is also critical. Fund managers need an outsourced partner they can trust to support them and generate operational efficiency cost effectively.
5. Secured and Sophisticated IT Infrastructure
The rise of targeted cyberattacks on hedge funds is a serious concern. Protecting the integrity of clients’ fund data and enterprise network security is a major challenge for alternative asset managers who neither have the sophisticated IT infrastructure protection nor the system process expertise. Addressing the cybersecurity risks and complying with the various regulatory requirements can mean a make or break situation for their businesses.
Outsourcing presents an enormous opportunity for fund administrators to take advantage of the right combination of secured technology platform and expert data process solutions to prevent financial institutions from falling victim to cyberattacks. Information technology outsourcing (ITO) has enabled many financial investment firms to take advantage of secured and integrated software as a service (SaaS) systems and cloud computing technology. ITO gives you the freedom from having to worry about the high cost of building on-site IT hardware infrastructure.
Choose a Trusted Hedge Fund Outsourcing Expert
Outsourcing your hedge fund middle and back-office requirements to experienced finance and accounting professionals can give you peace of mind and quality service that doesn’t waiver with staff turnover. It allows you to focus more on the other important aspects of your investment management business.
At Infinit-O Global, an ISO certified company, our focus on research-driven practical insights powered by advanced technology, economic intuition, and risk management expertise have made us a trusted partner in the alternative investment industry and hedge fund management outsourcing.
Our Infinit Accounting services provide fund accounting solutions that are tailored to your specific needs and offer a high level of customer service and personal attention at cost competitive rates. We have developed a unique four-part operations capability framework centered on PEOPLE, PROCESSES, TECHNOLOGY, and SECURITY. These define how we do business.
Our team of Hedge Fund experts, Certified Public Accountants, Certified Securities Specialists, and MBA graduates help investment organizations navigate complex reporting, governance and regulatory issues to achieve their business objectives. We understand the complex hedge fund financial reporting, operational requirements, and tax compliance issues facing the industry.
We are committed to providing the finest reporting solutions. Our premium hedge fund finance and accounting services include Net Asset Value (NAV) Generation and Performance, Brokerage Reconciliation, Trade Reconciliation, Cash and Holdings Reconciliation, Post Settlement Compliance Reporting, Exception Reporting, and more.
Ignite your hedge fund business growth today. Find out how our finance and accounting outsourcing services can help your hedge fund office save money and improve efficiency.