Six Huge Risks Investment Managers Take When Using Spreadsheets for Client Fee Billing

June 05, 2019

 

By Doug Fritz

It’s natural to choose a familiar tool to make tasks easier, and turning to spreadsheet applications for calculations is no exception. In the investment management world, financial services teams, CFOs and operations teams often use spreadsheets for client fee calculation and billing. While the endless formulas, worksheet linking, and cross-tab capabilities may make spreadsheets a good choice at first, firms will quickly realize how much complexity and risk they end up creating. 

Investment managers must be able to prove the accuracy of their calculations and how access to the data is controlled. When selecting the method for calculating fees and billing clients, care should be taken to ensure the platform provides flexible and consistent fee calculation, fee collection capabilities, audit tracking and data security, external system interfaces and analytical reporting. Hands down, spreadsheets offer limited ability to meet these requirements.

Here are six substantial risks investment managers take when they use spreadsheets for client fee calculation, billing and cash flow management.

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Electra Blog Posts, Electra Information Systems, fund administrator, fee calculations, Electra Billing, Advisory Fee Billing, Investment Firms, Investment Managers

How Investment Firms Can Rise Above the SEC's Six Most Frequent Issues with Advisory Fee Billing

May 21, 2019

By Doug Fritz

It has been about a year since the U.S. Securities and Exchange Commission announced a risk alert that “Most Frequent Advisory Fee and Expense Compliance Issues Identified in Examinations of Investment Advisers.” Such inappropriate fee billing and expense practices may violate the Investment Advisers Act of 1940 and the rules implementing it, including anti-fraud provisions. Since the SEC announced the risk alert, there have been numerous fines and penalties charged to firms who have overbilled clients, whether intentional or not.

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Electra Blog Posts, Buy-Side Technology, Electra Information Systems, fund administrator, fee calculations, SEC Compliance, SEC, Electra Billing, Advisory Fee Billing, Investment Firms, automation

4 Reasons Why Hedge Funds Should Shadow Their Fund Administrator

April 30, 2019

by Todd Sloan

One of the most important responsibilities of the fund administrator is to calculate the fund net asset valuation (NAV). Before calculating the official NAV, the fund administrator must ensure the accuracy of the data by way of reconciling the investment manager’s data against that of the prime broker or custodian. Fund administrators are well-versed in the different ways that a NAV should be calculated and the need to agree with investment managers on the methodology to be used before posting an official NAV.

The question is, why does the investment manager need to reconcile the makeup and accuracy of their NAV if a service provider or fund administrator is already performing reconciliation? After speaking with several operations professionals across the hedge fund space, we identified four main reasons why an investment manager should shadow their service provider or fund administrator:

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Electra Blog Posts, Buy-Side Technology, Reconciliation Solution, Electra Information Systems, reconciliation, shadow accounting, Hedge Funds, NAV, fund administrator, Data Reconciliation

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