Fund administration and the need for transparency

At a time when investment funds are developing their annual performance reports, the national and international financial press has been interested for several months months in the tense relations that portfolio managers may have with their partners, investors. On the one hand, the reliability of the investor is questioned more or less openly, but on the other hand, the same investor is often looking for managers who can guarantee lasting relationship based on real performance. The universe of alternative investment, opaque compartment of the financial assets’ management is one of the bastions. The terms of the funds are being redefined and the rate of hurdle seems to be losing its role of totem. Vehicles without hurdle are becoming less and less an exception and the rules of the game are becoming more complex. The flattening of the performances is obviously one of the main causes and the arrival of a probable “hard Brexit” at the end of October does not reassure.

The balance of the relationship between managers and investors is increasingly precarious and the culture of transparency does not always seem to be there. Is it really about transparency or rather complexity? Back office activities are more often outsourced, particularly in France, since they are too expensive internally, and those in the middle office retain traditional internal management processes. Yet, the young industry of Fintech/RegTech, to which Finwedge belongs, offers many digital solutions for data centralization, cleaning, and even data lineage, but the management processes remain frozen, not corresponding (not yet)  to digital transformation plans enterprises. Existing digital solutions are called front-to-back solutions that manage all daily information flows related to the management of portfolios and investment strategies, the trading of portfolios, as well as the main lines of administration of funds to enable the production of monthly, and regulatory reports. Everything is there to meet the requirement of conservation of a short cycle which is so precious to large retailers.

However, some back offices are re-internalized and it is increasingly more difficult for a Director of Operations to have control over his data. The skills of the back-office have been abandoned and the middle office continues to meet its mission by using part of the digital tools at its disposal. Integration and interfaces often fall within the realm of the imaginary. Moreover, the legal lack towards French hybrid funds does not seem to alert the regulator. Best practices are the rule and they remain the property of each depositary/asset servicing. Finally, the language of computer scientists is often obscure and the promise of data migration chills the blood of administrative officials. The technological development of modern solutions built around accounting of funds is no longer sufficient today. The fund creation dynamic requires agile and flexible solutions that take into account the evolving characteristic of these same funds. The user-caliber satisfaction is essential and must technically integrate the multiplicity of specific rules related to the life of each vehicle in the portfolio.