Q&A: Fund Administration Comes To The Cloud

Published on July 14, 2017

Editor’s note: The fund administration sector has been steadily implementing new technology, such as cloud-based computing, to improve the speed, accuracy and affordability of back-office processes that have been historically cost-prohibitive for smaller managers. To get a front-line perspective on these advances, FINalternatives recently caught up with Wasseem Ghorayeb, VP of Operations at fund administration technology provider KOGER, and Kenneth Cooper, CFO of ACK Asset Management, a KOGER client.

FINalternatives: What are the top three advantages to doing fund administration in a cloud environment?

Ghorayeb: The main advantage of a cloud deployment is cost savings. Fund managers don’t need to invest in new hardware or software, eliminating expensive updates and maintenance of IT infrastructure. You can scale up or down, adding or removing resources as required. With services in the cloud, you pay only for what you need and for what you use, so there is less redundancy.

What services are possible from the cloud that was either too expensive or too slow/labor-intensive beforehand?

Ghorayeb: Typically, a fund administration solution in a desktop server environment requires a critical mass of users to be cost-effective. The investment in what is typically considered “back-office” technology poses no problem for larger managers, but is usually cost-prohibitive for smaller funds. We offer our cloud system as an option for our fund clients.

Cooper: In today’s competitive market and rigorous regulatory climate, spreadsheets are no longer sufficient to handle complex administrative functions. Usually, the cost and support of an administration system are pretty complicated. We’re a manager with about $500 million AUM. We’re using KOGER’s cloud system to shadow our own administrator and verify records and statements. The cloud solution has been very cost-effective and the implementation has been easy and painless for me. It suits what I need.

How can cloud administration applications help smaller funds in particular?

Cooper: If they’re going to invest, institutional investors require the same rigorous standard and strict controls of small funds as they do for large ones. Large institutional investors demand sophisticated systems and built-in internal discipline. We accomplish these objectives with KOGER’s cloud technology at low cost. The ability for a smaller manager like ACK to demonstrate this level of sophistication and internal control provides us with a distinct advantage in supplying institutional investors, that we have the necessary infrastructure to ensure accurate accounting and reporting.

Can you describe the advantages for transparency and financial integrity that come with cloud-based fund admin?

Cooper: A number of funds create their own systems or spreadsheets. But you need a fully integrated system with input controls and proper audit trails to really achieve financial integrity. Using the cloud solution to shadow and verify our administrator has allowed us to demonstrate a high level of transparency.

With the cloud bringing greater computing power at lower cost and greater accessibility, won't the entire fund admin space move to the cloud? How long will it take?

Ghorayeb: We can’t really predict a timeframe. Generally, there has been increased adoption of technology among fund managers and administrators, with the aim of making processes and procedures more efficient and consistent. The cloud certainly presents great efficiencies, but there are some concerns around data protection and security that are currently affecting adoption rates. Some managers are looking at an internal private or hybrid cloud model as an alternative to the public cloud.

What's the next major tech disruption in fund admin? Blockchain?

Ghorayeb: Blockchain will be challenging to apply in an industry where data privacy is a key consideration. Certainly, the sector will continue to automate and leverage the advantages of big data at a faster pace.

FINalternatives