The robots have arrived. They aren’t out of a sci-fi movie, but rather are working on the growing demands from hedge fund managers for their fund administrators to incorporate more technology, automation, and robotics into their processes.
Hedge fund managers are increasingly asking for a range of performance information and analytics, including daily net asset values (NAVs), data aggregation and transparency for limited partners, as well as data for regulatory and compliance reporting, says Bill Salus, CEO of Paddock Consultancy, which focuses on the fund administration market. And that’s causing a “massive shift” in the technology that administrators have to offer clients.
The move to incorporate greater technology and automation comes as hedge fund assets under administration have continued to grow, hitting $4.3 trillion for the first time earlier this year, as reported.
Robotics process automation and back offices are a “marriage made in heaven,” says Jon Hugill, group information systems head at Maitland, a fund administrator.
“I think between robotics and blockchain, the fund administration industry is in for an enormous upheaval. There is so much work that is relatively low value but requires a person at present to be part of the process and robotics is going eliminate a huge amount of that,” he says, adding that it will allow for people to work on other problems and devote time to clients.
Maitland introduced its first “robot” named Eric in late April in its South African office. “It’s not R2-D2, it’s just a piece of software that runs in the background,” Hugill says, adding that it works on areas such as fund accounting and data capture and allows the firm to get work done outside of standard hours.
For hedge fund managers, the increasing use of technology across the space will mean that the quality and “the speed at which NAVs are struck will improve dramatically,” he adds.
New areas of the hedge fund landscape are also offering opportunities to build new interfaces. To manage the rise in cryptocurrency hedge funds and their often disparate and non-standardized data, Gemini Hedge Fund Services built a cryptohub to interface with all the major exchanges and to streamline data in order to more efficiently process funds, says president David Young.
“From a fund administration perspective, it always comes back to the quality of reporting. It’s depth of reporting [and] speed at which we report – and obviously automation is an important part of both,” he says.
The automation push is also changing the hiring landscape of the admin field, Young adds. “We do use more business analysts than ever before than just pure accountants to better analyze what we are doing with our data and better use and control the data.”
Overall, the fund admin industry is looking at faster, more efficient technology and better ways of looking at data so managers can understand how their businesses are doing, says Mike Megaw, managing director and global head of analytics and regulatory solutions at SS&C Technologies.
The next frontier for the fund administration space will be digging deeper into the possibilities of blockchain, he adds.
“I think there’s promise there. It’s hard to say when it’s going to have the impact. It’s obviously the buzzword – blockchain and [artificial intelligence] are married together… The timeframe of when [blockchain] actually plays out depends on how soon it finds the right problem to solve and the adoption of that,” he says.
The introduction of new technology and automation will continue to be an ongoing process of evolution and not an immediate revolution, Young says.
“It’s a lot different than it was 15 years ago in the fund administration space and the automation is reflected in the fees investors and managers pay to administrators today. It’s significantly less than it was… The cost savings has been passed on to the end user – the investors, which is where it should go,” he says.
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