The alternative investment industry faces a challenge of trying to create alpha while investments seem overvalued and volatility is low. Given the existence of these challenges, fund managers would prefer to manage this issue versus rising infrastructure and operational expenses. Over the last two years, the industry has seen increased demands from investors and regulators, which is adding pressure on both the fund and their administrator. Whilst dealing with these challenges, the industry is also facing fee compression which puts pressure on investments for the future.
As funds look for new ways to deal with these demands, a “thin layered” approach seems to be gaining traction. Funds will want to shadow the administrators but also have a flexible data structure that they can control. We are seeing more involvement from fund boards and, therefore, they are asking for more assurances on the official NAV calculations even if the majority of that work is outsourced. As a result, the need to shadow middle office functions has become a standard operating model.
As CFOs and COOs try and meet the internal reporting demands of their portfolio managers, the need to own their own data has become paramount. The ability to have a scalable, redundant infrastructure where the fund has complete control of its data is the direction Gravitas sees the alternative industry moving towards. We see a model of having an administrator for the official books and records augmented with middle office support performing checks to the administrator plus providing value add to their portfolio managers.
Through our Alameda platform and Co-Sourcing® model, Gravitas allows for such a partnership between the fund and their administrator. Our platform has the ability to provide pre-trade compliance, position tracking and third party reconciliations. We can offer a “follow the sun” model whereby critical tasks can be performed overnight and handed off to the thin layer sitting at the fund for final approval.
This enhanced model has seen various forms over the last few years from employee lift outs to full co-admin engagements. We believe that funds will need to be innovative in finding a support model that leverages technology but also has a flexible support structure to meet their growth trajectory.
Robert Diaz, Jr. is responsible for ensuring service delivery. He handles all staffing, technology and other requirements that service existing and new clients in all lines of business. Robert joined the Gravitas team in New York in June 2014 after having spent the last 13 years at GLOBEOP Financial Services SA, where he was responsible for fund services, serving as global head of fund accounting, operations and investor services across North America, Europe and India. Robert has extensive expertise in project execution, cross-functional delivery and process improvement. He graduated from Pace University with a B.B.A. in Finance.