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Transforming Back-Office Operations with Linedata Fund Accounting and Analytics Solutions

How Linedata can help its clients address their back-office challenges.

There has been no shortage of change to the back office. But while fax machines and paper mountains may be relics of the past, challenges remain as firms face greater complexity and cost pressure. Michael Galvin, Global Product Manager for Linedata’s fund accounting platforms, discusses how Linedata is helping its clients address their back-office challenges.

Q: Costs are continually squeezed, and there is a growing need to manage operational risk as fund structures and asset types become more complex. How is Linedata helping firms address this?

The back office has always been viewed as a cost center and has been squeezed in recent years with teams expected to perform more complex tasks – and do so faster and more cost-effectively. The complexity has come from various sources: increasingly complex asset types and fund structures (including process-heavy ETFs), greater regulation, and blurred lines between traditional and alternative fund structures. Cost pressures have come on the people side. Organizations can no longer simply “throw accountants at the problem”. At a minimum, solutions must be cost-neutral and in many cases, cost-negative.

Technology provides solutions to these challenges, and that is where Linedata comes in. We work closely with our clients to understand their pressures and expectations around completing tasks quickly and accurately. Our advanced business process management application, Linedata Optima, works seamlessly with our core fund accounting platforms to streamline and automate fund administration operations. This, in turn, helps our clients control costs, mitigate risk, and run their businesses more efficiently.

Optima enables our clients to perform exponentially more quality control checks very efficiently and cost-effectively. Individual clients are running up to one million automated checks each day. You could never build a big enough team to do that —and if you could, you would still have issues with manual errors and the lack of a digital audit trail. And it’s not enough to say you have done the checks; you also need the verifiable proof provided by Optima to support audits such as SSAE 16. Beyond audit satisfaction, operational dashboards help users quickly identify and resolve errors that could otherwise lead to an inaccurate NAV.

Q: When it comes to fund administration, what are the biggest challenges Linedata’s clients and other fund administrators face, and what factors affect these?

From evolving regulation to expectations around ESG and investor reporting, there is no shortage of challenges. On the transfer agency side, investor reporting used to be heavily paper-based, with investors receiving documentation on a defined schedule. Now investors are becoming much more demanding, expecting web-based real-time access to their information with the ability to self-administer their profile settings and even process orders directly themselves. Technology must provide the tools to match these expectations while maintaining tight controls as mandated.

ESG is more difficult because of the lack of consistent categorization and global standards. According to Linedata’s 2021 Global Asset Management Survey, more than two-thirds of asset managers have prioritized ESG integration into their portfolio, but 23% cited data integration and cost as an obstacle. And more than a year since the introduction of the EU’s Sustainable Finance Disclosure Regulation (SFDR), 31% cite the lack of industry standards as a headwind. 

Q: What new capabilities are firms looking for when changing their fund accounting systems, and how is Linedata addressing these?

The digitization of operations is critical. Some form of distributed workforce is now a reality for all firms. In addition, all firms need to build into their operational structures an expectation that a COVID-like event will happen again. The migration towards a model supporting digital workflows and processes was underway before COVID and has been heavily accelerated by the pandemic. Firms had already realized that the digitization process was a necessary step in being able to grow assets without a corresponding growth in headcount.

In the race to increase efficiency while controlling costs, more and more firms are using operational dashboards such as those provided by Optima to enhance operational oversight and transparency and make it easier to manage hybrid and remote workplaces. We also deliver an analytics tool, Linedata Analytics Service, through Optima, which analyzes and presents relevant data in an easy-to-interpret format so users can focus on what’s important at a given point in time, such as top ten holdings, top ten trades, etc. This service also hooks into data feeds so you can, for example, look at the market news behind positions with the most significant price movements. This provides an easy-to-digest connection between your accounting data and what is happening in the real world.

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Q: Artificial Intelligence and Machine Learning (AI/ML) capabilities are making their way into the back office. How significant are these developments, and where do they fit into Linedata’s offering?

When looking at new technology, it is critical to identify a clear business use case and not just adopt technology for technology’s sake. Most of the use cases we are deploying focus on increasing efficiency and reducing operational risk, which means catching potential questions or concerns before they become real problems. Whether making sure you have enough staff working on a particular part of the process to get things done in time or being aware of what’s going on in the market, AI/ML is making an impact in the back office. 

When exceptions are raised that may impact the NAV, AI/ML tools can help you know exactly when and to whom they should be assigned for resolution based on historical information. So instead of an exception sitting in a manager’s queue to be assigned manually, it goes to the best-placed employee out of the gate. Additionally, our analytics offering is leveraging clients’ own data to create models that successfully predict the likelihood of operational events. For example, on days when the NAV has tended to be late, our analytics service can identify triggers, so potential delays can be flagged and addressed earlier in the day to avoid issues later. AI and ML are about looking at data and spotting trends and patterns – and turning those into actionable insights that save time and money and mitigate risk.

Q: So, what is exception-based processing and how does it help firms rethink how they run their back offices?

This idea of exception-based processing is where systems throw up alerts for people to resolve as opposed to having to review lots of reports and manual checklists for issues that may not exist. Again, there are obvious efficiency and operational risk benefits, but that’s not all. As more companies and teams work remotely or hybrid or across different locations, they need to harmonize their ways of working—be that within a team or across an organization. It’s a big challenge, and companies have had to adapt. This was, of course, accelerated during COVID but has become a permanent feature, so it’s critical to have tools that enable consistent best practices and provide confidence that the right processes are being applied across the organization to achieve accurate, coherent outcomes.

Both Optima and Linedata Analytics Service are solutions that help our clients deploy resources more efficiently. We’re very much on the pulse of what fund administrators face in a rapidly transformative environment. Thanks to the collaboration between Linedata and our clients, these solutions are adding value on a daily basis.

About the author, Michael Galvin

Michael Galvin is Global Product Manager for Linedata’s fund accounting platforms. With 25 years in the industry, he has led the development of core applications, surround technology, and process management solutions for fund administration and investment management firms. Michael began his career as a fund accountant at JPMorgan Chase.

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