By Scott Rhodes and Todd Sloan

When we think about the transition from office worker to home worker, we think first about IT security: “lock it down!” Unfortunately, that mantra misses the big picture. McKinsey & Company says the most valuable asset of a firm is its people, and it is the operations-intensive environment of investment management reconciliation that underscores this sentiment. The role of skilled people and automation at the center of mission-critical, post-trade processes is apparent from both the standpoint of security and business continuity to eliminate single or multiple points of failure. That means not only protecting the business from being harmed by others; it also means ensuring business operations remain robust and efficient.

By Todd Sloan

Failed trades occur when the seller or the buyer does not meet their trading obligations on or before settlement date. Whenever this happens, the party who failed to deliver cash or securities on their side of the trade could face financial losses, fines and damage to their reputation on the street. Failing to meet their trading obligations may result in rating agencies downgrading their credit score, limiting their ability to shop around for the best counterparty relationships, and paying higher penalties under new T+2 settlement regimes.

While automation can play an important role, many investment operations managers are still dealing with errors and delays that lead to higher operational costs and risks. What is the solution? First, let’s take a look at the reasons why trades fail and their effects on the health of an investment management firm.

By Scott Rhodes

By Todd Sloan

An investment manager’s post-trade operations environment generally evolves as the firm grows. Technology solutions are important for helping firms manage increased trade volumes, mitigate risk and lower costs. Operational efficiency is always the goal, but over time, siloed solutions used to manage a particular area of operations get in the way of reaching that goal due to the tendency to make solution choices according to organizational structures and processes already in place.

In hundreds of discussions with investment managers over the years, we’ve often discovered the existence of multiple reconciliation silos, little collaboration across teams, and limited visibility into the data needed to improve the situation. In order to find the best solution to the problem, first we must understand the full impact and significance of the problem on a firm’s business.

The Dangers of Operational and Reconciliation Silos

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:

by Todd Sloan, SVP Product Management

Most reconciliation solutions provide the data normalization and matching capabilities needed to identify and categorize exceptions. These features have helped buy-side firms to streamline post processing and improve the quality of financial records. However, the reconciliation process can become cumbersome when an exception is identified, and the investigation process begins. It is at this moment when different data sources (such as corporate actions, failed trades, collateral, missing funds, etc.) need to be accessed to troubleshoot a break and determine the root cause of an exception. The time and effort taken to open different applications and web pages, rummage through the information, and then research and manually compare results diminishes the productivity of the operations team or IT staff.