Welcome to the New Regulatory Regime: ’40 Act Funds for Hedge Fund Managers

WelcomeLiquid alternatives – and registered ’40 Act mutual funds in particular – are heating up in the hedge fund sector, and it’s not hard to see why.

Investors want quicker access to their investment, and hedge fund managers want in on the USD$15 Trillion mutual fund market. Data from Preqin finds 22 percent of fund managers say they offer alternative mutual funds to their clients, and 11 percent plan to introduce them to their product line-up in the next year.

Most of us understand the growing appeal of instant access to investors, particularly after the recession. What’s more is we’re seeing retail and institutional investors seeking increased exposure to alternatives. All of this has amounted to a surge of investor interest in liquid alternatives. In July 2014, Preqin found that 35 percent of investors currently have an allocation to liquid alts (including UCITS-compliant hedge funds), with another 16 percent willing to consider these funds in the future.

For you, the hedge fund managers, it would seem like an easy decision to start attracting capital in the mutual fund space. However, going the ‘40 Act route means hedge funds need to subscribe to a whole new host of regulations on top of  the basics like Form PF and Dodd-Frank. You’ll be required to report daily NAV and portfolio performance, and maintain 85 percent of portfolios as liquid assets. For most hedge fund managers, these rules and requirements will be brand new.

They might feel a little daunting, but as much as it creates a burden on our end, investors really appreciate the increased transparency and regulation that applies to ’40 act structures. So when creating a ‘40 Act fund, remember this:

  • You’ll be required to work with a range of partners: a dedicated custodian, a fund administrator, an independent board of directors, a prime broker, an independent transfer agent, an investor services provider, and possibly more.
  • Every single party needs to be compliant with ’40 Act restrictions and the usual regulations affecting hedge funds.

Compliance is probably posing the greatest challenge to introducing liquid alternative structures, but fortunately hedge funds don’t need to navigate it alone. Partnering with a third-party technology provider can help managers run a regulated vehicle and stay within compliance guidelines. To learn more about solutions for simplifying compliance for liquid alternatives, check out this Hedgeweek US Fund Services 2014 Report.

Martin Sreba has been with Advent since 2000, holding a variety of senior roles in product services and sales. Currently he is a Principal in the Global Accounts Sales Organization.

Posted in Advent Software, Compliance, Hedge Funds

Eight signs you’ve outgrown your portfolio management system

8It’s 1990—you throw on your aviators and jump into your red and blacked striped Camaro. Passer-byers gawk with jealousy, and it does everything you want and more. Skip to 2014—there’s some glitches in the system, the paint is chipping, and the six-point turn just isn’t cutting it anymore. Time is no longer in your favor and generations of new and improved models have taken over the roads.

It’s time for an upgrade, but you’re not alone.

The pace of change with regard to how investment management professionals conduct business has moved extremely fast since the financial crisis. These changes have kept investment managers on their toes and, along with a general lack of trust in financial markets, have contributed to a challenging growth environment. The good news is that we are now seeing real signs of a breakthrough when it comes to growth.

Boston Consulting Group reported this summer in its annual worldwide study of the asset management industry that the asset management industry has now had two consecutive years of solid growth with 2013 marking its strongest year since the financial crisis.

Behind this period of emerging growth are a number of factors like the introduction of new asset classes and strategies, geographic expansion, and new sources of capital inflow. BCG also points to a more demanding class of investors with a growing preference for nontraditional assets.

This is exciting news for the industry, but no doubt, new sources of growth bring new challenges of their own like the need for increased investor due diligence and for a scalable, flexible infrastructure to facilitate growth and change without disruption to the investment manager’s day-to-day operations.

For those feeling the impact and challenges of growth, check out this webinar I recently led to help identify whether you’ve outgrown your portfolio system. We’ll walk through eight signs to determine if you’re getting what you need from your current systems to keep and are well positioned to keep your business on track for growth.

If you have a hunch you’ve outgrown your portfolio management system, ask yourself these questions:

  1. Are you able to support all instruments, asset classes and currencies that the Portfolio Manager wants to adopt?
  2. Are you able to fully shadow your NAV to your Fund Administrator?
  3. Does client reporting deliver on the frequency, transparency and depth that your investors demand?
  4. Do you have real-time data access and management?

Did you answer no to the first 4 signs that you’ve outgrown your portfolio management system? It may be time to trade in that 1990 Camaro.

Tune in to hear the final four signs, and how you can overcome challenges and regulations for future growth of your business.

Marvin is a solutions consultant at Advent Software with responsibility for presales consulting and solution development for Advent’s fund accounting platform Geneva. His primary focus is to provide a functional and technical consultative support for both hedge funds and service provider firms.

Posted in Advent Software

If time is money, then finding the right RMS is no joke

RMSOver the past year, chances are you’ve heard about, or may have even participated in, the act of “unplugging.” But if you’re like me, the thought of seeing that pesky red icon on the email app creep dangerously close to triple digits makes you rethink tossing aside your phone for a game of capture the flag at the next digital detox camp.

Let’s face it; the de facto system of choice for storing data is email. How long do you spend managing your email inbox daily? I’m guessing awhile. But it isn’t just email, and it isn’t just you or I. Most people in wealth management are realizing that efficient organization of all data is necessary to be competitive in the industry, including Joe D’Angelo, Vice President and Portfolio Manager at Signature Global Asset Management. “We spend a significant amount of money getting access to information as quickly as possible,” he says. “Creating hierarchical filing systems and saving electronic documents was becoming increasingly cumbersome.” Signature Global is one of many firms that ran into this problem: time is literally costing money, and a lot of it.

Since the data deluge isn’t showing any signs of slowing down, the next best thing is working with technology to manage it. Implementing an effective research management solution (RMS) doesn’t just help cut those costs but can also centralize research data from local drives, cloud based storage, and email, index it, simplify search and retrieval, and reduce compilation and formatting time.

Ask yourself these questions:

  • How much time do my most valued employees spend trying to find the basic information needed to do their job?
  • What proportion of time is spent searching for information vs. analyzing it?
  • How much money is discovery costing your company each year?

If you stopped to pause on any of these questions, then check out this client story from Signature Global Asset Management. D’Angelo explains how switching to a centralized knowledge bank can foster collaboration and allow your teams to spend more time on the decisions that matter. And maybe even give them a little time to “unplug.”

Andy Phillips is a Director of Solutions Consultant focusing on Research Management solutions globally. Mr. Phillips joined Advent in 2007 and  has worked with investment firms’ front office groups in both pre-sales and implementations of the Tamale research management product.

Posted in Advent Software, Trends, Wealth Management

Cloudy with a chance of Hybrid: Understanding Private and Public Cloud and Everything In Between

cloudySo, you’ve decided you’re ready to move your business to the cloud. You’ve heard all about the benefits – the cost savings, the workplace flexibility, the scalability, ease of adoption, etc. – and after careful consideration, you’ve determined you want to take the next step.

But when you approach a solutions provider like Advent and broach the subject of the cloud, it’s a little more nuanced than asking for Geneva, Advent Portfolio Exchange, or Black Diamond “with a side of cloud, please.”

In our previous blog post on the cloud, we began to shed light on the basic differences between the private cloud (operated internally by the organization) and the public cloud (operated by a third-party), noting there are benefits and drawbacks to each. Adding another layer to the mix is the hybrid cloud, a cloud computing environment that blends elements of both the private and public cloud.

At Advent, we want to give you the flexibility to choose the cloud setup that best suits your individual needs and goals. Here’s a basic overview of the cloud setups we provide our clients and how we manage the environments:

  • Public: Advent maintained and operated multi-tenant environment on a public cloud provider.  Although we use the phrase “public cloud provider,” the environment is solely operated and maintained by Advent.
  • Hybrid Private: Advent maintained and operated single-tenant environment on a public cloud provider.
  • Private Remotely Administered: Advent maintained and operated single-tenant environment on a private cloud provider or an internal firm-specific cloud.  Advent remotely monitors and manages the software stack and solutions, including providing upgrades.

There is no one-size-fits all approach to selecting the right public, private or hybrid cloud implementation – you have to weigh the best scenario for your business.

For more information on cloud-based technology for investment managers, download “A Clearer View”, our white paper that covers security, compliance, and the cloud.

Todd sets the company’s long-term technology and solution vision. It’s his job to make sure our solutions incorporate the best technology innovations to meet our clients’ needs and are easy to adopt, own and use. Follow him on Twitter.

Posted in Advent Software

AdventConnect Opening Session: Three Drivers of Success

AdventConnect 2014 is in full swing. This morning I had the opportunity to welcome and thank everyone for traveling from all over to give us their focus for the next three days.

The theme of my opening remarks today was progress – the progress we’ve made over the past year as well as that which we aspire to. If Advent is to be the leader of progress in our industry, there are three things we must master:

1. Make technology easy for all generations

Think about it: With the arrival of mobile and social platforms, we now see for the first time technology that is being adopted universally across all generations, from our children to our parents. Why? Because it is that easy.

That is why we built the Advent Direct platform, which enables people to access and view data from different systems in ways that are useful to them. Our first application, Advent Direct Investor Management, is now available to all of our clients, thanks to the 20 firms that worked with us in pre-release to help us get from vision to reality. Advent Direct Investor Management is designed to help our clients engage their end clients more effectively and strengthen relationships.

2. Listening

Within Advent, we tell ourselves to be humble and stay curious, because we have so much to learn from our clients. But being good listeners also means being able to prove that we heard you and show you how we’re responding. That is why we launched the Advent Direct Community – to keep the dialogue that starts at this conference going all year. Today, we have over 11,250 users, representing 3/4ths of our client firms. We are now building our product roadmaps based on feedback we get on Advent Direct Community, and sharing those roadmaps for all to see.

3. Imagination

We love hearing clients say “I wish…” Because our job is to imagine how to fulfill that wish, and then make it happen. That’s one of the reasons we acquired Black Diamond, a company that had the imagination to use cloud technology to transform how advisors do business. And because it’s a pure cloud platform, the Black Diamond team can act very quickly to make our clients “wishes” come true, with new enhancements every month.

Our businesses may depend on technology, but they thrive because of the expertise of people. As we embrace new technology, the mission has to be clear: helping our clients attract smart and talented people, and equipping those people with tools that enable them to make a tangible difference in the lives of investors. As I reflect on the progress we have made, and acknowledge how much more needs to be done, I am more optimistic and fired up than ever that we can deliver on that promise together.

Watch a replay of our full opening session, including interviews with clients explaining the value they have derived from our new technology, starting at 2:45 PT on Tuesday, September 9th.

As CEO and President of Advent Software, Pete Hess has responsibility for vision, strategy and execution across Advent’s global business. Follow Pete on Twitter.

Posted in Advent Software, AdventConnect

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