Fund Administration Outsourcing
Fund Administration Outsourcing On the Rise
(HedgeFundBlogger.com) The message is clear, those funds which have survived this crisis or are starting up must add more institutional risk controls and best practices. Working with an independent administration firm is nothing new within the industry - many have been using them for years, the change is that now smaller funds are being asked to use administration firms by their investors, boards of advisers and service providers.
Large firms which have been performing the hedge fund administration function in-house are now re-thinking this. Small firms who attempted to perform this in-house to save money are now looking at the same decision. I personally have heard from and am working with several sub $100M funds which are considering the use of fund admin firms and were not doing so in early 2008. An article on this trend recently came out within Wall Street & Technology here. It starts out with this segment:
With the events of last year in the credit markets and the Madoff scandal sounding another alarm bell, hedge funds are turning to independent fund administrators to validate the net asset value of their funds and calm investors.It continues with this useful passage on why this is an important step for them to take:
Yesterday, Millennium Management LLC, a global multi-strategy investment management firm with over $13 billion in assets under management, said it outsourced fund administration to GlobeOp Financial Services. GlobeOp is an independent financial technology specialist that provides integrated middle and back-office, administration and reporting services to hedge funds and asset management firms.
"Given what's happened last year and given the Madoff situation, you can't be careful enough," commented Hans Hufschmid, CEO of Globe Op who is based in London.
Previously, Millennium did the fund administration itself. But there is pressure from investors to pick independent fund administrators, said Hufschmid. "You want someone else to trust and verify," he said, noting that the fund administrator must verify all the cash positions, trading positions and make sure the fund pricing is correct. Statements go out monthly to investors but the work of reconciliations and pricing goes on daily.On a side note...In 2009 the same group which runs HedgeFundBlogger.com is launching a new website exclusively on the topic and industry of Fund Administration. This will be similar in nature to our PrimeBrokerageGuide.com website. This article above is a good example of what you will be able to find on this new administration site once it is launched...
The independent fund administrator trend has been evolving for a while but has been pushed hard now by investors, he said. Investors are asking for an independent fund administrator for every hedge fund they make an investment in, said Hufschmid. source