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"CFOs should be alarmed if an administrator does not have dedicated software with appropriate controls and authorisation in place."

Keep up or risk it all - the rise of specialist technology in fund administration

23 Aug 2018

In the final edition of Richard Hansford's three-part follow-up to June's CFO Forum in Lisbon, he details the salient points regarding fund administrators' choice of technology and how it can be critical to both the safety and accuracy of data.

It is no secret that Chief Financial Officers at asset management companies love Excel. From financial modelling to forecasting, they use it for a number of integral requirements. However, Excel's prevalence within the asset management industry could be on the slide.

At the recent CFO Forum, the Microsoft Office staple found itself at the centre of an interesting panel discussion focussing on whether or not it still had a place within today's industry.

Excel, or not to Excel?

For decades, CFOs and Finance Directors have used Excel to analyse fund performance and predict future financial behaviour. Given the specific requirements of CFOs, Excel offers the ability to create completely customisable reporting documents to suit specific criteria. This has provided CFOs with a great deal of flexibility for documenting their work, flexibility that most other platforms fail to deliver.

However, using Excel is fraught with danger. The ability of users to easily manipulate data, coupled with the lack of a clear audit trail, has caused CFOs to (in this instance) publically discuss whether Excel is fit for purpose. This has been magnified given the increased regulatory scrutiny and continual advances in technology. Yet it is felt that at present, CFOs are struggling to find anything that has both the flexibility and the authorisation/audit controls that are convincing enough to make them switch platforms.

Some administrators will be left behind

One of the really interesting points that arose from the discussion was that some of the administrators that CFOs use also choose Excel for completing fund operational tasks, such as capital calls and distributions. On hearing this, other CFOs around the room gasped. The general consensus was that given the inherent risks of essentially managing third party capital flows via Excel; this was too risky to stomach.

Adapting is the key to surviving

CFOs should be alarmed if an administrator does not have dedicated software with appropriate controls and authorisation in place. Administration technology has significantly advanced over the last 15 years, most notably with the development of eFront and Investran to name but a few. These platforms have obscured the need for Excel and the heightened operational risks it carries. As a result, there should be no excuse for administrators continuing to carry unnecessary risk by persisting with Excel for carrying out fund operations across administration and accounting.

This risk is amplified by regulation's continued upward trajectory. Over the last five to ten years regulation has intensified and with it, CFOs and institutional investors are demanding administrators provide greater, more robust operating models that are supported by leading technology.

Increased oversight from investors places yet more pressure on the shoulders of the CFO, with data accuracy a crucial factor contributing to investors' choice of fund administrator. CFOs gain comfort from their administrators using specialist technology as the consequences of inaccurate data can be substantial, with incorrect money moving through a fund structure and ending up with the wrong investor. Managers using administrators without specialist technology should be concerned and look to adapt.

Ocorian has been utilising specialist fund accounting technology for many years, helping Managers to ensure their structures are secure and accurate. To learn more about our Alternative Investment offering, visit here.

Part One - The evolving role of the CFO

Part Two - Are you striving for operational excellence?