Operational efficiency is a goal for any business organization. For such a competitive industry like the hedge funds, this goal becomes even more important: To survive, a company needs to be wise at dispensing its resources, and making sure that each expense item truly adds value to the operations.
Towards efficiency and to cope with the changing demands of an ever-growing domain, many a firm has invested in new technologies, new services, new hires only to find that these do not, in fact, bring in much benefit. The result is a much more cautious pool of portfolio managers whose hesitation in adopting innovations into their front, middle, and back offices prevent them from making a step forward, in terms of widening their product lines, grabbing new trading opportunities, or even conquering new markets.
Ultimately, they will be outperformed by those who are willing to study the risks and implement the right infrastructure accordingly. For one, it must be noted that the competitiveness of the asset servicing industry has spawned many outsourcing providers that are eager to please, and ready to cater to requirements beyond the traditional technology or back office support.
These days, the most sophisticated asset servicing partners have the capability and the solutions to handle a wide range of investment management operations. They have the staff and platform for data warehousing and management, daily trade and bank reconciliation, accounting, tax reporting, and compliance management, allowing hedge funds firms to focus on their front office and growing the assets under their management.
With this development, the companies that enlist asset servicing solutions do so much more than just reduce their overhead costs. More importantly, they are able to streamline their procedures, and reallocate resources that were previously deployed to parts of a system with redundancies. They learn to prioritize and master the core components of their operations, and delegate the rest of the functions to a third-party entity with specialized services and the latest tools for said functions. Their talent are able to focus on particular, strategic tasks, and develop their skills to become miles ahead of the competition. The enlistment of asset servicing might even spur an overhaul of a firm’s entire business model.
In the end, efficiency through asset servicing will mean not only money savings for hedge funds, but a leaner but more results-oriented organization that can truly take on the various challenges of asset management in this era.
