As the fund accounting system provider for a broad range of alternative investment funds and administrators, we’ve got a birds-eye view of emerging needs. From our perch, here’s our predictions for 2015.
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More diversity
Funds will continue their search for returns and will seek out even more diverse investments.
Over the past years, we’ve seen traditional hedge fund organizations morph into hybrids of hedge fund + private equity + traditional 1940 act funds.
Given the ongoing challenges of the global economy, that trend will continue.
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More complexity
As investments get more complex, so will the business environment that funds operate in.
In 2014, we saw the emergence of fee arrangements with more complex hurdles. We also saw fund managers responding with additional clawback provisions. Those provisions become increasingly important as funds finally dig out of the hole caused by the global recession.
Overall the simple 2 and 20 arrangements will be a thing of the past. The new norm will be multi-tiered fees with various catch-up arrangements and varied application of loss-carryforwards.
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More transparency
A propensity for caution on the part of investors will continue in 2015. On result of this is the demand for better and more comprehensive reporting.
While many funds now offer some transparency on the portfolio side, more investors will demand more detail for their entire investments. That will mean expanding the investor statements as well as more detail regarding fee charges.
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More shadowing
The movement to shadowing the administrator will quicken in 2015.
No longer will fund managers and investors simply rely upon administrators to perform the fund accounting. Double-checking their work, particularly when it relates to fund document provisions (such as fee arrangements) will become the norm for internal hedge fund staff.
Having one administrator shadow another could also become more prevalent in 2015.
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More administrators
We predict an increase in boutique administrators as a result of increasing demand for specialized services, such as statements tailored to the needs of each fund.
Since many large administrators struggle with custom client requests, the market for smaller, more specialized administrators will grow. These firms will have the economics to support more customized service.
Bonus prediction: it it going to be a long year.
We feel pretty darn sure of this one since the world will be adding an extra second to atomic clocks on June 30.
The extra second shouldn’t cause any angst in the alternative investment space, which routinely bends the space-time continuum by using the 30/360 method to override the physical calendar.
