Tailored data supports growth

Hedge fund managers must offer customised reporting in order to attract and maintain allocations from the largest investors

The shift in the balance of power between investors and hedge fund managers has been well documented. As the industry has continued to mature, managers are going to great lengths to accommodate the large institutional investors that have reputations for making ‘sticky’ allocations.

Powerful investor groups such as sovereign wealth funds, sizeable asset allocators, large pension funds and endowments are requiring enhanced levels of service and data provision in return for their loyal support of hedge fund managers. One of their key requests is customised reporting, in addition to regular data feeds which they can leverage for their operational processes as well as supplementing the information that they have in their own CRM system.

Daily, weekly and monthly data

Many of these investors can demand not only daily, weekly and monthly data feeds, but have also negotiated complex income allocations and fee arrangements. This powerful trend requires that the administrator develops its investor processing and income allocation system in a way that supports managers when seeking allocations from some of the world’s most sought-after investment groups.

Customised reporting is part of a broader move towards a more integrated partnership between managers and their investors, which appears to be intensifying. A recent survey from the Alternative Investment Management Association and Barclays highlighted the extent of this collaboration. 1 More than three quarters of managers and two thirds of investors said they had entered into partnerships.

In order to accommodate the need for bespoke reporting and seamless data delivery, the administrator’s transfer agency and income allocation platform must deliver a combination of flexibility and standardisation. It must be able to blend customised reporting with the benefits of economies of scale, while always maintaining an optimal control environment.

Development of Æxeo Investor

Citco identified this trend many years ago and developed a proprietary application in response to clients’ requests. It is committed to a programme of continually developing the Æxeo Investor (AXI) transfer agency system’s functionality. In tandem with this best-of-breed functional platform, Citco set up a dedicated in-house team to create customised reporting for clients.

Not only does AXI offer the nuts and bolts of the transfer agency function – namely record keeping, capital activity processing and investor level compliance requirements – but also it is a state-of-the-art solution integrating general ledger, income allocation, fee calculations and straight-through payments processing for a myriad of counterparties. What’s more, it manages complex liquidity tracking and transparency for underlying investors. Citco also supports custom enhancements, reducing clients’ reliance on external vendors.

For maximum efficiency, the AXI system integrates fully with proprietary portfolio accounting platforms. Its reports are accessible through the Citco Portal, which enables both managers and investors to develop their own custom reports and extracts, in addition to over 250 available reports.

AXI’s continual development and improvement keeps pace with changing client demand. In the past few years, AXI has been upgraded to handle both unitised and nonunitised, or partnership, funds. Upgrades to the application are currently being made about eight times a year.

Supporting future growth

Looking to the future, current trends suggest that institutional investors may hand the hedge fund industry’s growth baton to retail investors, which are investing in hedge funds through 40 Act and UCITS fund products. If this continues, further standardisation of transaction processing and associated reporting will be required.

Once again, administrators will hold the key to growth, as this standardisation and automation can only happen if administrators provide the necessary technology infrastructure to support investor needs.

19th September 2014