New Requirements Will Necessitate Automation

Staffing shortages, investor pressures and new regulations will force mutual funds and hedge funds to embrace automation techniques in order to meet increasing reporting and expense management requirements in the coming year, according to a leading automated data management group.

“Surprisingly, today’s fund administrators depend almost entirely on manual methods and cumbersome spreadsheets to control their expenses,” said Kirk Botula, executive vice president and chief operating officer for Confluence. “A better solution is to automate the expense management process in order to control costs.”

Staffing shortages in fund company and service provider back offices will intensify, pressuring fund administrators to automate routine processes to reduce staff dependency and eliminate the risk of error, he said.

Investors will demand low-cost products, forcing fund companies to exert more cost control and drive down operating costs, Botula said.

As fund companies and service providers incorporate the Financial Accounting Standards Board’s new fair valuation reporting rule (FAS 157), accounting and fund administration systems will need to automate the reporting process to reduce the burden on back-office staff and lower the risk of error, he said.

The Securities and Exchange Commission’s short-form prospectus reporting requirement will burden administrative staff that doesn’t have the technology to streamline the process, Botula said.

“There are many forces driving the automation of fund administration functions,” he said. “These include the global expansion of fund companies, increased frequency of reporting across many different regulatory and accounting regimes, and heightened transparency demands.”