The future of your fund of funds: Switching providers to enhance operations

Operational excellence is back at the top of the agenda for funds of funds managers as the investment landscape for strategies becomes ever more complex.

Like the wider market, funds of funds administered by the Citco group of companies (Citco) have seen inflows rising in recent years amid increasingly strong performance. To take advantage of this trend, managers need the operational models to both keep pace with the growth of the market and prepare them for the future.

Funds of funds currently face the burden of managing multiple service providers across different operational functions - including administration, investor relations, treasury & banking, lending, reporting, compliance, and custody - creating inefficiencies, duplicate data, and operational risk.

They are therefore revisiting how they work to remove operational friction, against a backdrop of increasing pressure to deliver enhanced reporting and bespoke investor requests, as well as adhere to ever changing and burdensome compliance rules.

An integrated operating model that allows them to focus on managing investments while a single trusted partner oversees the complexity above solves this challenge, bringing together critical services under one roof, but many managers hold back from implementing such projects with a new provider because of concerns over switching.

The big switch – why managers stay put

Managers put up with outdated technology systems and unreliable service models because of concerns around moving away from their current administrators and other providers. Data migration, system compatibility, established reporting and workflows are just some of the areas that can overwhelm managers and see them settle for what they already have. Alongside the operational disruption, the cost of switching also remains a concern. There is no denying these are real issues, but as asset servicing has evolved, solutions are emerging to speed up switching and ensure funds have the operational structure to achieve long-term success.

For funds of funds, changing custodian or a lending provider adds additional complexity and potential headaches. However, Citco has comprehensive experience of such re-registrations and understands how to navigate the key considerations of such a change.

Better client integration – the key to an enhanced operating model

A well-executed integration process is the cornerstone for any fund of funds considering switching service provider to improve operations.  Covering areas including the communications framework, steering committee setup, deep dive sessions, project tracking, SLAs and dedicated resourcing from the incoming provider, the client integration process is a strategic initiative for the long-term rather than a one-off solution.

Designed to improve scalability, enhance transparency, and position firms for future success, any integration lifecycle needs to follow a predefined roadmap with the proper level of governance to ensure timely decision making and transparent milestone management. Citco’s approach incorporates all this in the stages outlined below.

The Citco way – the team to take you forward

Citco has built dedicated client integration and transformation teams with proven track records of onboarding and converting funds.

Working alongside incoming clients, Citco’s 150-strong client integration team focuses on delivering overall service continuation, de-risking key processes to limit disruption, while leveraging our expertise, technology and proprietary solutions to build a bespoke model that works for today, and into the future.

Our experienced team knows how to partner with clients to implement operational builds, acquisitions and the latest technology, leveraging data experts and system integration to identify optimal operating model for managers and their end investors, and then build them. Going together with integration is our Transformation Office. Often, funds of funds managers will need to change certain processes to ensure success. Our approach to change is to embed a Citco project management team of SMEs within firms to commence the discovery process, working with teams to identify areas that may require change.

Citco’s Transformation Office consists of 500 dedicated professionals that have worked across all areas of our business and have obtained project management skills to help execute changes and build better businesses for clients.