5 Key Tests for Picking the Right Fund Administration System

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By Vera Romano
April 25th 2024 | 3 minute read

Technology has become central to fund administrators’ service propositions and a key source of competitive advantage.

As investment managers hive off non-core functions in an effort to boost their own competitiveness, partnering with outsourcing providers that can deliver the requisite speed, quality and reliability of service only gets more important. Stringent due diligence examinations to test that administrators’ IT systems are up to the challenge are now the norm. Which makes picking the right technology infrastructure vital to winning tenders and holding on to clients.

5 must-have system attributes

What does the ‘right’ software entail? We can boil it down to five factors.

  • Functionality

The shift away from traditional 60/40 portfolios in favor of broader diversification – manifesting especially in a rise in alternative asset allocations – demands systems with native multi-asset class capabilities able to cope with the operational idiosyncrasies each asset type brings.

Investor interest in and regulatory scrutiny of environmental, social and governance (ESG) investing is also evolving. A joined-up data model and integrated systems that can provide look-through from the shareholder record to the underlying portfolio are key to tracking the portfolio components and delivering transparent, timely reports on investors’ ESG attributes.

Transparency, customization, ease and responsiveness have become key watchwords in clients’ servicing expectations. Investors wants seamless digitalized interactions at every stage of the fund manager relationship. Onboarding, subscriptions, redemptions and drawdowns should be automated and hassle-free. Customized reports offering granular breakdowns of activity, positions, valuations and performance, accessible through an intuitive online portal, are another must-have.

  • Automation

Functionality must be matched with performance and smooth client service if investment managers are to attract and retain clients. Sustained margin compression throughout the value chain adds to the focus on process and cost efficiency.

No single platform will cover an administrator’s full enterprise technology needs. But properly configured, controlled and integrated systems, underpinned by intelligent workflow management tools to maximize process automation at every stage of the transaction and investor lifecycle, will enhance data integrity, eliminate errors, increase speed and stability, and maximize client satisfaction.

  • Scalability

Legacy systems, spreadsheets and manual workarounds remain all too common in the fund administration space, perpetuating workflow inefficiencies, risk and duplicated cost. As assets grow and client servicing demands get more complex, adding to the inefficiencies and risk by simply ramping up headcount in an attempt to cope is no longer an option.

Introducing functionality-rich, multi-jurisdictional automated capabilities allows for more unconstrained growth – in theory. But beware the promise of automation. A fund administration platform may be able to host the data and run the reports you want. Functionality counts for little though if it isn’t married with reliability and robustness, regardless of activity throughput.

  • Security and resilience

Cyberattacks are inevitable. The best administrators can do is strengthen their defenses and minimize the risks.

Look for software built on a modern architecture with the latest security protections, such as dual key, maker/checker transaction controls, row-level security and tailored user permissions. And ensure the vendor vets any open source or third-party software libraries it uses to ensure it only employs reputable sources.

Administrators’ disaster recovery and business continuity planning protocols are also coming under the spotlight. Is data in the system backed up at all times? And can you seamlessly recover from any breach or ransomware attack?

  • Vendor dedication and partnering

Fund administration systems are long-term purchase decisions. The solution provider’s stability, strength and commitment to the sector, plus its all-important development roadmap for the technology, will determine how good a long-term match the platform proves to be – considerations we’ll delve into further in a subsequent blog.

Replacing a fund administration system involves a major investment of time and resources, bringing expense and disruption. So it pays to pick well. Look at the system capabilities you have and where as a business you want to go. Then choose a solution that can best support your, and your clients’, ambitions.

Vera Romano
Vera is responsible for driving Deep Pool’s overall marketing strategy. Vera is a qualified and proven marketer with 20+ years of experience at companies ranging from tech start-ups to large corporates, where she has led creative teams in developing and managing innovative brands through strategic campaigns to grow market share, sales and achieve targets.