US EAST COAST 2012 - HFMWeek

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THE FIRST RULE OF SUCCESS SURROUND YOURSELF WITH THE BEST The success of any law firm can be measured by the quality of its people and its clients. We have the best of both. The Asset Management and Investment Funds team comprises 9 partners and over 40 asset management professionals in total, based in our Dublin and New York offices. We are experts in alternative investment funds and UCITS using hedge fund strategies, and have one of the longest established and largest hedge fund practices in Ireland. Our client base includes leading global financial institutions, investment banks, fund managers and broker-dealers. We are recognised internationally for our depth of legal, regulatory and market knowledge and our ability to deliver innovative solutions for our clients. Matheson Ormsby Prentice. Lawyers of choice for international companies and financial institutions doing business in and through Ireland. driven by excellence Contact Michael Jackson, Head of our Asset Management and Investment Funds Group, at michael.jackson@mop.ie, Aiden Kelly in our New York office at +1 212 792 4151 or your usual contact at Matheson Ormsby Prentice. www.mop.ie DUBLIN LONDON NEW YORK PALO ALTO
US EAS T COAS T 2012 ADMINISTRATION INSTITUTIONAL INFRASTRUCTURE AS THE ALTERNATIVE INVESTMENT INDUSTRY CONTINUES ITS MARCH TOWARDS INSTITUTIONALISATION, LEO LAFORCE OF HEDGESERV TALKS TO HFMWEEK ABOUT THE CHALLENGES FACING FUND MANAGERS AND HOW FUND ADMINISTRATION CAN HELP BY DELIVERING A WIDE RANGE OF SERVICES UNDERPINNED BY HIGH-QUALITY INFRASTRUCTURE. Leo LaForce is a managing director at HedgeServ, overseeing marketing and communications for the global fund administrator. HedgeServ currently services more than $150bn of assets under administration, supported by 500 professionals across five offices. Leveraging administrator technology platforms have always been a popular option for hedge fund managers to help them cut their overheads and banish worries over infrastructure and back-office setups to a certain degree. But with the industry constantly evolving, and increasingly rigorous regulatory requirements and investor demands – not to mention constant leaps in technology – hedge fund managers need to be sure they are getting value for their money when it comes to choosing the platform for them. Leo LaForce, of HedgeServ, discusses the challenges faced by administrators. HFMWeek (HFM): The findings of a recent study by a leading consultant firm highlighted the growing importance of administrators as a key service provider for managers. Beyond independent asset verification and portfolio pricing, how else are administrators adding value to managers Leo LaForce (LL): When delivered correctly, capable administration supports managers with institutional infrastructure, freeing managers to focus on growing assets. Managers can further leverage an administrator’s infrastructure to reduce costs, strengthen controls, and benefit from 24/7 access to actionable data for meeting their business, investor, and regulatory reporting requirements. I would stress the word ‘capable’ as the industry continues to see what I’d term a ‘flight to capability’. Managers are moving away from traditional single-provider models where administration is simultaneously performed by their prime broker or custodian. Institutional investors are viewing independence as best practice controls when evaluating a manager’s service provider relationships. A second significant factor driving this trend is the widening gap between the current needs of managers and the capabilities of the legacy technology underpinning many administrator platforms. Administration has to migrate from models focused on ‘lowest-cost-of-production’. A factory-like approach can’t keep pace with rapidly changing industry requirements. The new industry landscape requires administrators to THE NEW INDUSTRY LANDSCAPE REQUIRES ADMINISTRATORS TO THINK DIFFERENTLY ABOUT PLATFORM DESIGN ” think differently about platform design and to continuously invest in better technology. Administrators need to break the status quo if it is to provide new answers to the many new questions facing managers. HFM: HedgeServ has a reputation for innovative technology. What has the firm done to break the status quo LL: I would describe the HedgeServ platform as well thought out. Our technology is designed from the manager’s perspective, and aligned with what managers are looking to achieve; namely cost-effective operations, scale for new strategies and growth, flexibility to meet business needs, and maximum investor confidence. We were fortunate to have a green field advantage – no existing legacy systems to contend with – when initially designing the HedgeServ infrastructure. We also benefited from the collective insights of a HedgeServ management team with extensive prior experience building and supporting global administration models. Industry events and the lessons learned were also incorporated into our original platform design, and continue to be as the industry evolves. The credit crisis is a prime example. Managers needed critical portfolio information fast, in timeframes and formats traditional administration struggled to comply with due to technology limitations. Another example is that, post-Madoff, administrators must prove that infrastructure and controls can withstand forensic onsite due diligence by investors. Otherwise, the administrator risks presenting red flags that could hinder a manager’s capital raising efforts. Nowadays, increased cost pressures are raising the barriers of entry for newly launching managers and leading many managers, emerging and seasoned alike, to consider outsourcing functions such as middle office operations and Form PF preparation. As managers continue to face new challenges and uncertainties, they need the options to seamlessly increase or decrease administration service levels as needed. HedgeServ has responded by extending its platform to be both enterprise in scope and plug and play in nature. HFM: Managers are looking to administrators for an increasingly wider range of services. How are administra- HFMWEEK.COM 35
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