How critical is it to have 24/7 global coverage?

Global coverage for a global industry appears to be the mantra for fund administrators. Many believe that to survive, an administrator needs to be close to clients as well as the fund’s investors. The need for daily reconciliation in many funds and increased reporting requirements has also led many administrators to conclude a 24/7 operation is needed. However, there are still a few who say a global footprint is not necessary and are content with smaller, more local operations.

One administrator who believes in a global presence is Peter Hughes at Apex. According to Hughes increased demand for services from the administrator from investors and fund managers has led Apex to prefer a model that keeps its services close to clients.

“We have placed our offices in the same location as the fund managers to meet these expectations. We saw China funds being administered in Cayman – a 14-hour time difference didn’t make sense if you are delivering a quality service. We saw an opportunity to win this business by sitting next to the fund manager and delivering the service locally with Mandarin-speaking staff,” explains Hughes.

David Aldrich at BNY Mellon agrees that managers are increasingly accessing investors around the globe. “They appreciate the ability of global players to service these needs in, for example, Singapore, Hong Kong, Australia, Europe and North America,” says Aldrich.

At Butterfield Fulcrum, Akshaya Bhargava also believes it is “critical” to have a 24/7 operation in an “age of global trading strategies and daily reporting requirements”.

He believes the global operating model favoured by Butterfield Fulcrum meets the demand. Clients want operational and technological platforms that can enhance the level of reporting, accounting and valuation for alternative asset managers and their clients, he believes. 

“Our global network of offices, from which any part of the net asset value (NAV) process can be completed, means that following the setting of a customised client service level agreement, work is assigned to the most appropriate operational location, depending on delivery requirements, expertise needed and time zone advantages,” explains Bhargava.

Using a proprietary workflow management system, he says, provides tailored process flow for each fund and real-time operational transparency for clients. “Our global operating model has allowed us to standardise processes and policies, ensuring consistency of service delivery across time zones,” Bhargava concludes. 

Citi’s Richard Ernesti says the growing demand for daily reconciled P&L can be met most effectively through leveraging multiple time zones. “Large, multi-national funds have also come to expect their administrators to demonstrate global consistency in processing and platforms. Global coverage can also mean global insight and expertise,” he notes.

Hans Hufschmid at GlobeOp thinks it is important to provide fund managers with reconciled position, portfolio and cash data at the opening of each trading day. “We call this the 8am reports package. This requires a global network of offices to optimise time zones, integrated technology and experienced personnel.”

“If an administrator needs to provide daily valuations, which is often the case for Ucits III funds, for example, then having a 24/7, or at least 24/5, administrative capability will be critical,” says Dermot Butler at Custom House. With operations in Malta, Dublin, Chicago, Luxembourg and Singapore, Butler says he is able to provide daily valuations.

He gives an example of a master fund with multiple sub-funds. The trade recapture begins in Singapore or Chicago, when the markets close. The book is rolled to Singapore when it opens, continuing the trade. Once the trade recapture has been completed, the Singapore office starts the reconciliation of the total book in the master fund. That is then passed on to Dublin and/or Malta, which then produces the daily valuations of the segregated sub-funds. When that is done, the book is rolled to Chicago which thens report the NAVs of all 120 sub-funds to the client by 15:30 T+1, Chicago time.

“This would not be possible if we did not have 24/5 coverage,” says Butler. 

Paul Stillabower at HSBC Securities Services agrees this coverage is becoming more critical, particularly for the very large customers that are operating on a global basis more frequently. “For the majority of alternative fund managers, 24/7 is probably more a ‘nice to have’. The key question for fund managers really is ‘does their administrator have support for their fund managers/traders and also for their back office/middle office staff?’,” says Stillabower.

Stephen Castree at Equinoxe is not convinced. He thinks the ability to have full access and understanding of all information in the correct time zone with a suitable qualified staff member is more important. “Ability to leverage multiple offices to accelerate the turnaround of daily information is useful but not imperative if the communication challenges cause service quality issues,” he concludes.

Trinity’s John McCann believes the need for 24/7 global coverage depends on the size and nature of the fund client. “Global macro players, without question, would require such an offering but the industry is populated by a majority of smaller more niche players who concentrate in more localised markets or asset classes in their search for alpha. These types of clients would not have such a need in relation to servicing their products,” says McCann.

Stuart Feffer at LaCrosse Global Fund Services says it is not “so important for administrators just providing a basic month-end NAV.” For providers of middle-office and operational support to funds trading global markets, it is absolutely critical, he says.

Having a physical global presence is advantageous from a marketing and sales perspective, according to Liam McNiffe at Bank of Ireland Securities Services (BoISS). “From an administration perspective this is not critical for hedge fund administration where there is monthly dealing and a T+3 or T+5 delivery timeframe,” he admits. BoISS administers daily funds for US and Japanese clients and has put in place shift teams (early and late) to meet its client needs in these jurisdictions, says McNiffe.