Posted on 20 February 2019
Exceeding Investor Expectations with Independent Outsourcing
According to PDI, 98% of institutional investors in the US have conducted greater due diligence over the last three years, increasing demand on the back office. As demands increase and data accessibility becomes a trademark of investor expectations, credit fund managers face the difficult task of keeping up while simultaneously dedicating sufficient energy to their core activities.
Timothy Ruxton, Director, explains what he sees as the ideal solution for both investors and credit fund managers looking to build trust and rapport, while also enhancing their overall strategies.
What do investors want?
“Reporting, transparency and data security are at the forefront of investors’ basic expectations. In a fast-paced, digital world, it’s no surprise that investors are expecting increasing levels of accessibility to this real-time data. But even more important than access to the data, investors need to be confident in the data’s accuracy and integrity,” Timothy explains.
Unfortunately for credit fund managers, the time and expertise required to deliver on these expectations creates an enormous strain and pulls them away from their actual work of sourcing deals.
What is a manager to do?
When placed in such a predicament, credit fund managers must evaluate how best to give their investors the thorough output they seek, while still maintaining focus on their core mission: effectively managing their investors’ money.
Fortunately, as investors seek greater data transparency, accuracy and independence, managers can take part in independent outsourcing as a means to lessen the strain.
“Independent outsourcing,” he adds, “means that a credit fund’s reporting and administrative duties are all undertaken by a third-party. And while ‘outsourcing’ was a lesser-spoken word just five to ten years ago, it has begun to evolve into a sought-after must-have component for investors and lenders alike.”
What are the benefits of independent outsourcing?
By outsourcing administrative and reporting functions to a third-party administrator, credit fund managers are putting levels of independence in place, giving investors and other market participants great confidence.
It also allows for increasingly efficient financing of new credit in the market. Managers have been utilizing warehouse facilities with borrowed funds more increasingly and banks could be more willing to lend to a manger with independent outsourcing than those without. They have greater assurance of the fund’s ability to meet compliance expectations, knowing the manger has the time necessary to focus on sourcing deals and executing strategy.
“The fact is, third-parties conduct operational activities for a living. Fund managers and their staff may not be experienced in all aspects of the operations and are forced to figure it out. Needless to say, outsourcing these functions also creates added levels of time-savings, money-savings, and efficiency to the fund’s overall strategy.”
Who can they turn to?
While outsourcing these administrative functions to a third-party may sound like a no-brainer, choosing the right partner is critical. After all, no administrators are created alike. Managers should look for a partner with experience administering and transacting in their specific industry. This will ensure that the administrator and manager both speak the same language and will get the job done right the first time around.
In addition to being knowledgeable, the administrator must also be capable. Technology plays a vital role in providing investors with greater access to the data related to the fund.
“At Alter Domus,” he explains, “we created a tool for this specific need. CorPro, our online portal, allows managers to streamline their outsourced third-party administrator experience. They benefit from consistent access to their data and workflows. It truly maximizes the interaction between the investment manager and our delivery teams."
“Their investors benefit from access to fund financial data, documents and reports, providing them with everything they expect and more. All of the fund’s activities can be segregated or aggregated in order for the strategy to be viewed as a whole. All data is independently verified for accuracy. This gives managers and investors immense peace of mind and potentially sets the fund ahead of its competitors."
“I have yet to meet a manager who says they got started in the fund world for the love of admin and reporting. These functions, while critical and complex, create huge compliance burdens for even the most effective managers. Outsourcing to a trusted third-party administrator allows them to free up time to focus on their core business, provide investors with exactly what they seek, and set themselves apart in the highly competitive credit market.”