In the search for alpha, many offshore fund managers are looking to diversify their portfolios. For example, in the Cayman Islands, the offshore jurisdiction of choice for many hedge funds, a growing number of traditional hedge fund managers are choosing to invest some of their portfolio in illiquid assets usually associated with private equity funds.
In turn, hybrid, multi-asset or multi-strategy structures can present new operational challenges for fund servicers – and threaten to increase their technology costs. So, how can offshore administrators keep their operations streamlined but ready for diversification and growth?
Seeing the bigger picture
For many firms, the answer to the multi-asset question has typically been to service different asset types with different systems – thereby adding to their technology footprint.
This piecemeal approach is understandable, as a more demanding investment market calls for increasingly specialist functionality. But it also introduces a conflict. On the one hand, fund administrators need best-of-breed components to manage new challenges. On the other they are pursuing higher levels of efficiency and transparency, which can be hard to achieve with disparate solutions from different vendors.
A fragmented technology environment for fund administration makes it more difficult for asset managers to report back to their investors – who really want to see a holistic picture of their portfolio, covering both liquid and illiquid investments. With a broader set of assets now finding their way into a higher proportion of offshore funds, it’s never been more important to manage multiple asset classes from a single platform – and gain an aggregated view of risk and performance.
What’s more, offshore managers that invest in different types of assets are now less happy to employ a range of specialist administrators. And that makes the fully automated, multi-asset-class platform the new must-have solution for offshore fund administrators, enabling them to service hedge funds, private equity, institutional and retail as a one-stop shop – and delivering common output with timeliness, accuracy and frequency.
Breaking down industry barriers
To support ongoing growth, offshore fund administrators must be able to automate and streamline the processing of complex multi-asset investment portfolios and strategies – and, as much as possible, integrate the accounting solutions they use for different asset types.
But the comprehensive coverage of asset classes is only the start of what integrated technology can achieve. The ultimate objective should be to break down the barriers between industry verticals as much as possible – and ultimately to meet all your processing and reporting requirements through a single platform, including for new and complex derivatives instruments.
As a result, an offshore investor will be able to view data on its whole hybrid or multi-asset portfolio, however complex, in real time. While providing a comprehensive multi-asset accounting solution, a single platform for both liquid and illiquid assets also gives administrators the opportunity to enhance controls, workflow, reporting, audit and compliance.
By allowing core processing engines to communicate with one another more effectively, fund administrators both offshore and onshore can mirror the market trend to bring more asset classes together – but without adding operational complexities or unnecessary costs. And in today’s complex, converging investment environment, a powerful multi-asset-class platform is a valuable commodity in its own right.