Partnering with Clients on the Reengineering Journey

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The transformation of the global alternatives marketplace—with new investors, investment strategies, customer requirements, technology and compliance regulations—is driving funds and service providers to reengineer traditional approaches to capitalize on new opportunities.

“There’s a whole new marketplace for alternatives, that’s why we have to invest,” said Mac Kirschner, our Chief Operating Officer, during the panel discussion, “Requiem for Reengineering: Scaling Up Operations to Align with Growth” at our recent Global Alternatives Summit in Miami. “It’s investing in data strategy and having a data foundation. It’s investing in culture, which is huge. It’s retraining your people and getting them ready for this next phase.”

Mac joined a group that included Richa Kumar, a Managing Director at KPMG, Adam Menkes, Head of Business Development at Atlas Technica, Shelley Rosensweig, a Partner and Co-Head of Investment Management (NY) at Haynes Boone, and panel moderator Brian Yegidis, our Head of Business Consulting, to explore how funds are moving to streamlined platforms with improved workflow, tailoring products for new investors, and outsourcing front-office functions as part of new target operating models.

Richa explained that there has been a “huge expansion in the number of funds” with increased complexity and across geographies, that has strained alternatives marketing and distribution channels. Clients’ complaints range from delays in investor onboarding to AML/KYC processing and late delivery of investor notices. “The infrastructure is choking,” she said. “It’s making asset managers pause.” She added, “Shops that used to be traditionally self-admin are calling KPMG, as an example, and saying, ‘Come do a vendor analysis for us. Come tell us what our Target Operating Model should be.’”

Increasingly, firms choosing to outsource some functions that have traditionally been managed in-house. “We are being asked to move from the back office—books and records support—and continue through the middle office and into the client experience, from an onboarding perspective,” Mac said. “Investment managers are asking us to take on AML/KYC and the static data management, bring in those clients in a seamless manner and cut down on all the friction that’s created.”

Upgrading technology and eliminating legacy infrastructure will be one of the keys to seizing opportunities in the future. “You have to be ready to incorporate newer solutions like AI, like data programs, like the ability to work from different locations during a pandemic,” Adam said. “By moving toward cloud technology, software as a service-based technology, you’re giving yourself tremendous scale.”

Establishing strong controls to protect data and systems from cybercriminals remains a priority, especially as expectations for instant, secure access to data grows. Adam said. “There’s a lot of transition that goes into securing an environment where the data is now everywhere, and it’s not just sort of locked in a room, and you can only get to it one way,” he said, noting that pending SEC rules will require an annual assessment of risk profiles and attestation that funds are aware of, and addressing, risks. Ultimately, any new operating model will require a close partnership between funds and service providers that begins with deconstructing service-level agreements to determine needs, and then working together to achieve those goals, Mac said.

“We are a client-service business, first and foremost, and we understand that every client is different,” he said. “Decide what you need and come to us, or bring us into that discussion, and we’ll build the model for you. It is our job to help build and reengineer. We need to be along on that journey with you.”