Fund administration system migrations: The keys to success

By Tom Dillane Director of Product Integration
March 29th 2022

Investors are more committed than ever to their alternative investment programmes, notes Preqin’s latest Global Alternatives report. Drawn by the diversification and return benefits on offer, Preqin expects private capital, hedge fund and other alternative assets to soar from $13.32tn at the end of 2021 to $23.21tn by 2026.

Such strong growth trends will be welcome news among fund administrators serving the alternatives space. But for many it will also be tinged with unease as they question whether their investor servicing capabilities are up to the task.

The migration imperative

To prosper, fund administrators increasingly need scale and industrialisation. There are two ways to get there:

  1. Consolidation through M&A.
  2. Leveraging enhanced technology.

Both raise the same issue all administrators dread: how to successfully migrate their clients onto a modern, unified investor servicing platform?

Moving from one fund administration software environment to another is typically seen as complex, time-consuming and risky. Even though many administrators wrestle with outdated transfer agency and fund accounting platforms, or have become burdened with multiple disparate systems following bouts of M&A, the perceived pain of migrating has often held firms back from switching.

That’s not sustainable.

The rationale for M&A comes in many forms. But economies of scale are a major driver. Those economies depend on sunsetting legacy or duplicated systems and moving to a streamlined, integrated technology environment.

Firms can similarly strengthen their efficiencies and client servicing capabilities by shifting from siloed infrastructures to a multi-asset class platform able to support any fund type. Investor servicing for retail, private equity and hedge funds traditionally occupied separate universes, performed by specialist providers on distinct, market-specific software. No longer. As the boundaries between these worlds blur through sector hybridisation, firms need all-encompassing functionality to cope (including an ability to handle cryptocurrencies and tokenised assets).

Global regulations are changing, making compliance responsibilities more onerous and complex. Technology developments – with advances in automation, digitalisation and cloud delivery – are gathering pace too. Administrators need to keep up with the times if they are to remain competitive.

Common points of failure

Migrations are unavoidable. The key is to ease the pain.

Much of the challenge lies in moving data from one official book of records to another. Systems have different data structures, so databases can’t just be copied over. It requires a mapping exercise to transform and house the data. Historical transactions and valuations have to be captured and recreated in the new book of record, and that starting point has to be correct. Any missed reconciliation or bad data point can take significant effort to rectify.

System integrations pose a further challenge. Legacy transfer agency or fund accounting platforms will be linked to a host of other up and downstream applications, such as market data feeds and regulatory reporting solutions. Integrations not ported over properly will create ongoing operational problems.

Migrations are time-sensitive too, requiring a clean cut. The switch from one system to another should occur at a logical time (ideally year-end, so the complete year-to-date reporting is housed in one system) and be completed within a month. Every month that passes brings a new valuation to incorporate, a new set of data to replicate.

Users are an additional consideration. They become habituated to their old systems and a certain way of working. Learning to use a new technology, however superior the capabilities, takes some adjustment. Systems offering an intuitive user experience can shorten that learning curve.

Plan for migration success

Overcoming these migration challenges demands professional project management. Stakeholders need to be identified, tasks broken down and ownership assigned to the appropriate person. A project plan must be in place for every stage and eventuality, with RAID logs to track risks, actions, issues and decisions. Rather than a side of desk project, having a dedicated project manager to take the migration from start to finish is crucial to ensure it is a focused effort that hits all its deadlines.

The software provider will be instrumental in the project’s success too. A modern application architecture and sophisticated APIs help ease the infrastructure integration process. Providers that can draw on expert consultants who understand the data, and have a track record in successful migration projects, can also lead firms through the migration to make it as smooth as possible.

With the right planning and partner, administrators can then move forward with the system capabilities they need.

ABOUT DEEP POOL
Deep Pool is the #1 investor servicing and compliance solutions supplier, providing cutting-edge software and consulting services to the world’s leading fund administrators and asset managers. Our flexible solution suite, developed by an experienced team of accountants, business analysts and software engineers, supports offshore and onshore hedge funds, partnerships, private equity vehicles, retail funds and regulated financial firms. Deep Pool is a global organisation with offices in Dublin, Ireland, the United States, the Cayman Islands and Slovakia. For more information, visit: www.deep-pool.com.

Tom Dillane
Tom has set up the data office at a fund admin which enabled data-based decision making at an exec level across all pillars from revenue to cost, marketing, resourcing, & product. He built out an analytics department in parallel to embed a scalable function for best-in-class product & application management.