Hedge Fund Administrators Turn To Technology, AIS Offers Financial Statement Ease

Feb. 7, 2011 - PRLog -- Opalesque Exclusive: Fund administrators look to technology for competitive edge as hedge fund assets recover

From Kirsten Bischoff, Opalesque New York:

Increased investor demands for transparency and reporting requirements
from regulatory agencies are a headache for hedge fund managers, but
the brunt of these new demands are being felt by fund administrators.
The administration industry struggles from being one where staffing
typically has to stay in line with assets, while levels of service (i.e.,
reporting) need to remain the same regardless of assets. So, over the past
two years as those reporting requirements increased and asset bases
decreased, administrators felt the squeeze of having fewer employees, yet
needing to provide the same or higher levels of service to their hedge
fund clients who needed better reporting to appeal to investors. This
caused the loss of several administrators and consolidation amongst
others.

Now, as hedge funds begin to recover assets and reporting requirements
continue to rise (a recent SEI/Greenwich Associates poll showed
institutional investors are ready to embrace hedge fund investing but
have high expectations for transparency) fund administrators will be
faced with a "one-two punch" that will mean much higher competition for
assets coming back into the industry. Hedge fund managers looking to
take part in the expected inflows from institutional investors will need to
offer higher levels of transparency, and will be re-evaluating their
administrators from this perspective.

"Suddenly as fund advisors are anticipating SEC registration along with
increased reporting disclosure requirements in Europe and Australia,
administrators are bracing to deal with the increased workload," Kirk
Botula, Executive Vice President and Chief Operating Officer, at
technology provider Confluence commented to Opalesque.
Confluence says that 40% of the leading global investment managers use
the firm's technology solutions and sees in that client base that more
fund administrators turning to technology to both differentiate
themselves and to meet the growing demand for higher levels of reporting
from hedge fund clients.

For example, last week, Opalesque carried news that hedge fund
administrator AIS Group was offering clients additional reporting services
through AIS Financial Statement Preparation, which uses the Confluence
Unity® platform. Paul Chain, President at AIS Group commented that
many of the managers who had already adopted this service from the
firm were increasing the level of reporting available to their own
investors, because prior to technology advances such reporting, when
done in house at a fund, was simply too time constraining on the fund's
accounting officers to make available more than absolutely necessary.
"We are seeing administrators investing in technology, but how they are
choosing to leverage it is different. For example, some are doing mass
customization to meet each manager's individual needs and
requirements," says Botula. "But they are all using it to reinforce their
core market positions while enabling scalability and control."
With fund administrators taking up the slack on additional reporting
needs, the stress may be on those firms at the moment, however, it is
likely that in the end, investors will pay the cost of their own demands
for increased transparency. While most administrators in the end will
likely offer reporting in line with regulations, anything over and above
those requirements will incur additional costs.

"Managers will find that providing the highest levels of transparency to
entice investors returning to the hedge fund market, will in the end come
at a steep price. Increased fees being paid out to administrators will cut
into fund management budgets and it is likely either management fees
will rise or there will be further flexibility on incentive fees for managers."
says Daniel Golyanov, Senior Analyst at research firm Carbon360
(publisher of the Fund Administration Factbook). "In the end, investors
will have to pay for a higher level of service.

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About AIS Fund Administration:

AIS provides middle and back office support to hedge funds and fund of hedge funds. . Our mission is to provide total daily operational support backed by comprehensive daily reporting, ensuring a timely and accurate final NAV.