By Justin Hayes, Product Manager, Linedata
We all recognize the strengths of spreadsheets, the reasons why we love them and persist in using them for managing the allocation and calculation of master/feeder, partnership, series and other complex structures. They are flexible, capable of handling gloriously intricate calculations, wonderfully familiar, we understand how they work and yet each one can be customized to meet a specific need and adapted as that need changes. But there’s also a dark side to our relationship with the rows, columns, formulae, functions, charts and graphs. There are inherent problems in the use of spreadsheets for complex calculations such as master/feeder, partnership or series structures and it is these that should prompt you to find an alternative.
Manual intervention and an accumulation of process steps are unavoidable if using spreadsheets for the calculation of complex processes. Each time data is extracted from or imported back into your core investment accounting/transfer agency solution represents a new risk of data corruption and inaccurate information being used as the basis for calculations. Additionally, you run the risk of formulae being changed and causing incorrect values which impacts your final valuation. And if the creator of the spreadsheet leaves there is a possibility that no-one else truly understands how it works.
Nowadays, auditors will recommend that all calculations or allocations are done on a dedicated platform that has full security and audit controls – something that a spreadsheet cannot offer. They will look for a full back-up of data through a platform which can process automatic back-ups rather than relying on human intervention like a spreadsheet does
It takes significant resources to create and map out the formulae required for complex relationship-related calculations, especially as they will need to be tested and re-tested to assure that they are correct. There is also the cost of error to be considered, both financially and reputationally. If you could automatically, visually map the relationships and let the underlying system do the calculations, it would free up resources, saving you money and reducing risk.
Even once your spreadsheet calculations have been set up, tested and are ready to go, it still takes time to run the processes, extract the data and put it back in the system to send on to your clients. Imagine a world where you could automatically calculate the NAV’s for 60+ underlying series funds or multiple income gain/losses for 100 partners at the push of a button, posted in just seconds. Why would you ever use a spreadsheet again?
Your investors – present and future - will want to know how you handle master/feeder, partnership or series structures and whether your processes are robust and replicable, with fully auditable historical data available. This is hard to achieve when using spreadsheets and their use may afford you a black mark in the due diligence check list. Select a system where this functionality is embedded, add the fact that reports can be created to go direct to investors and you’re back in consideration.
Walking away is never easy, but, in the context of managing the allocation and calculation of master/feeder, partnership, series and other complex structures, there are solutions which can do everything that a spreadsheet can, and more, in a robust environment and with the added benefits of auditable history, automation and visual tools, supporting both offshore and onshore funds and unlimited fund structures. It’s time to say goodbye to spreadsheets…