Ten Questions to Help Alternative Managers Evaluate Fund Accounting and Investor Reporting Technology
Recent technology advances mean today’s alternative investment managers have access to a range of technologies that can significantly streamline alternative investment fund reporting and recordkeeping. While changing fund accounting and investor reporting platforms isn’t quick and easy, the right system can save you time, reduce your risk and help you grow assets faster.
Clear, comprehensive reporting that answers your investors’ performance questions—before they even need to ask—saves time, reduces frustration and makes for a better client experience. In addition, upgrading your investor reporting platform may allow your team to focus more of their time on activities directly tied to growing assets and revenues. But choosing a platform for the lowest upfront price or biggest brand name doesn’t guarantee the highest long-term return on your investment. In fact, a mediocre tool from an unresponsive administrator can carry significant costs in the form of system problems that lead to reporting errors, manual-intensive workarounds, and frustration for you—or worse—for your investors and partners.
So, how do you ensure you get the best system for your needs? Following are a few key questions to ask.
1. Are we talking about one system or many?
Consider how many different tools and data flows your team will need to manage, or whether you will be able to access all your fund-related data in one place. Some solutions require that your team and your investors login to separate systems for different data; for example, your investor portal may be completely independent from the fund accounting software. In contrast, other providers offer fully integrated platforms, including an investor reporting portal, which allows for a seamless flow of data, document sharing and a more holistic client experience.
2. How well does the system integrate with others?
Although a new private fund accounting and investor reporting system will likely replace some of your current tools, you might want to maintain others. For example, to maintain continuity for your investors, you may keep your existing client portal. Your new system should be flexible enough to integrate with existing platforms and external partners, as well as any you might want to add in the future. Ask potential providers about how they handle API integrations and automated data feeds.
3. Does the platform strengthen your brand, or compete with it?
Some tools are clearly labeled as from a third-party. Others work seamlessly behind the scenes as an extension of your team. They present your firm’s look and feel, allowing for consistency in your communications with your investors and enhancing the perceived value of your brand. Look for tools that can streamline the investor experience through the life of your fund, beginning with fundraising and onboarding to financial reporting and ultimate dissolution.
4. Who owns the technology and how quickly do they address requests for improvements, changes or fixes?
No technology will be perfect forever. Sooner or later, you will undoubtedly need the service provider to make changes to the system, either to correct a problem or to account for unique operational processes or new regulations. Make sure you know what to expect and how quickly they will respond. A private fund administrator who owns their technology may be able to implement changes more quickly than one who doesn’t. Consider how much flexibility your current provider offers. If larger enhancement requests are needed, how will yours be prioritized?
5. How often do system upgrades occur?
You may appreciate a service provider that is not just responsive to your requests, but also proactive about continuous improvement. As a rule of thumb, most software needs to be upgraded annually to meet an evolving regulatory environment and changes in investor demands. Ask how regularly the provider makes upgrades and how they protect your investors from maintenance-related service disruptions. Ask about a technology roadmap and consider how it aligns with your own vision.
6. What investor insight can the system provide?
Consider how much transparency you will have into how your investors interact with the data and documents available to them. Some tools allow you to track and measure each investor’s level of engagement over time. This information can offer valuable insight into improving fundraising and client service. With the right metrics, you will be able to evaluate engagement throughout the decision-making process, starting from the first time a potential new investor seeks information about your firm.
7. How well does the compliance support align with your needs?
Whether you fully outsource your compliance process, have a dedicated in-house team, or are somewhere in between, you will want a provider that supports your process. Consider whether you will need to enter or retrieve information from multiple systems, which may have inconsistent data, or whether the regulatory compliance and reporting tools all draw from a single source of truth.
8. Does the provider offer expertise in addition to software?
Make sure your provider has a deep understanding of the technology, and how it fits into your business. Improving your reporting processes takes more than just buying a new technology tool. You also need the skills and support to help you get the most out of your investment. Similarly, consider whether your team will have a single point of contact to answer questions and address concerns, or whether you will need to interact with your technology provider separately from your fund accounting team.
9. Will the system accommodate your firm’s long-term strategy?
Consider your long-term business and product strategy and a system’s ability to scale and adapt as your business changes. Some systems can handle broad products and service across private equity, hedge and interval fund products, while others are specialized and support only one strategy. If your business expands into multiple strategies, but your system supports only one type, your investors may need to access different portals to interact with your firm and products.
10. How much control do you need over your data?
Some systems allow for on-demand import, export and data-sharing capabilities. Others require you work through your administration team to get the data you need. Consider how quickly you need information turned around, what data you need in real-time and what information you need only periodically.
Making a change to your fund accounting and investor reporting platform can be a difficult decision for many managers, while others know from experience exactly what they are seeking. Considering these concepts up front can assist with finding the right fit for your firm and ultimately, your most important asset: your investors. Asset managers who take the time early on to identify the system capabilities that are business-critical tend to be most satisfied with their decisions in the long run.
Learn more about UMB Fund Services and how we can support your firm’s registered and alternative investment fund administration needs, or contact us to be connected with a fund services team member.