Why outsource your hedge fund’s middle and back office operations?

Today, hedge funds are on the lookout for ever more cost-efficient measures to adopt in their day-to-day operations. That is, while also ensuring the quality of their services to their client investors as well as the performance of the funds under their management. For middle and back office operations in particular, outsourcing to third parties has been a viable option for many.

Below are some of the reasons why more and more funds are partnering with asset servicing firms:

Lowered costs. It takes a lot of company resources to retain personnel who can be devoted to fund management back and middle office tasks. Outsourcing eliminates these by taking on those costs, for the fee that they charge. It might be an investment, too, but in general, enlisting third parties should result in savings, as well as intangible benefits.

Access to expertise. Through outsourcing, hedge fund managers are able to access expert services for such highly specialized tasks as tax reporting, pricing of assets, anti-money laundering checks, NAV creation, and the preparation of investor statements. What can seem to be complex functions have already been mastered by these third party service providers, precisely because it is their job.

Access to latest technologies. Asset servicing firms are compelled to be updated on the latest tools to swiftly accomplish tasks related to back and middle office operations. They monitor news on the newest platforms for data management, or applications for automating reporting or compliance tasks. They spend for cloud-based systems for data warehousing, and they could do so because they can use these for different clients.

Improved confidence among investors. When a company hires a third party to support its operations, it boosts confidence among their client investors. This is because it is proof of sound management procedures, and a well-oiled machinery that can take on both the laborious, everyday tasks, as well as strategic decision-making. Moreover, it might be reassuring to learn that there is an independent party that can offer check and balance, which generally means more efficient operations, and reduced susceptibility to errors.

Room for growth. With an outsourcing party responsible for the middle and back office, it is much easier to deal with growth. The service providers, with their tools and staff, can scale their operations and take on the increasing load, while the fund management firm can focus on charting the direction of their business organization, and perhaps tapping new markets, too.