Outsourcing Infrastructure to Remain Competitive
A private equity firm was facing challenges on multiple fronts:
- Investor demands. Todayís investors have come to expect timely and detailed reporting, as well as independent third-party administration. Investors are also raising the bar on administrators, seeking automated processes, SOC 1 Type II (formerly SAS 70) tested environments, and business continuity planning.
- Over-reliance on spreadsheets. Frequent updates and programming required more time and research by the firmís limited resources, and much of the firmís work was done offline on spreadsheets, or on small-scale software platforms. Calculating data and performance numbers required a significant amount of time and required increasingly greater oversight.
- Lack of scalability. The firmís main processes were very manual, making them overly time-consuming and inconsistent. Because of this, issuing a new fund offering would require an increase in employees and a massive time commitment, as the firm had to start from scratch on any new project. For example, each new reporting request required a new set of calculations and process. This was inefficient, error-prone, and lacked the institutional quality the firm desired.
- Multiple roles. Because the firm was managing all its operations in-house and growing rapidly, employees were forced to take on multiple roles, resulting in a reduction in the time spent focusing on their primary jobs. Even employees whose primary roles were to manage investor relations were asked to perform day-to-day administrative and operational tasks, limiting the time and quality needed to adequately focus on investors.
The firm decided that, in order to maintain a timely and consistent level of service as the business grew, it needed to consider outside support.
Experienced partner, tight schedule
The firm needed a partner who could instill confidence in its investors, help increase productivity and efficiencies, allow it to focus on growing the business, and convert its existing in-house processes on a tight schedule. After extensive research and due diligence, the firm determined SEI had the reputation and proven track record to complete a large conversion (including historical data) within a calendar quarter, based on its:
- Experience. SEIís dedicated private equity team has extensive experience servicing different fund structures and investor types. This comprehensive knowledge has enabled SEI to quickly and smoothly convert even the most complex structures, and integrate them into existing platforms and technologies. In addition, SEIís familiarity with the regulatory environment was a critical feature for the firm, as SEI keeps pace with current regulatory requirements, and proactively looks ahead to prepare for future changes.
- Technology. Automating many of the firmís manual processes was a top priority. SEIís technology eliminated the firmís need for cumbersome spreadsheets, expensive conversions and upgrades, and helped turn the firmís raw numbers into useful business intelligence that the firm could use to keep its investors better informed. The straight-through operating model allows for a comprehensive view of fund data and offers a myriad of automated reports.
- Scalable infrastructure. Given that much of the firmís existing manual processes were neither flexible nor scalable, it could not expand as the business grew. Adding new accounts was time-consuming and error-prone, requiring a substantial amount of attention and effort in the review process. SEIís fully scalable integrated infrastructure could be customized to meet the firmís individual needs. In addition, SEIís platform can quickly expand to include new funds, structures, or investments, so the private equity firm could be more nimble in the market and open to future growth, while containing costs.†
- Controlled, process-driven approach. SEI undergoes annual SOC 1 Type II certification examinations (formerly SAS 70 Type II) in accordance with SSAE 16 guidelines, and frequent disaster recovery and business continuity plan testing throughout the year. The firm specifically cited SEIís audited and process-driven environment as a benefit for its investors and would help maintain the firmís focus on risk mitigation.
Additional services help the firm run leaner
Beyond solving the firmís immediate challenges, some of the additional services provided by SEI include:
- Investor servicing. SEIís Investor Services group has taken over many of the investor documentation processes, including receiving and reviewing investor subscription documents, and performing anti-money laundering due-diligence and substantiation collection. The team is also responsible for maintaining and confirming updates to wire instructions, and collecting information necessary for capital calls, distribution notices, and statement mailings.
- Cash administration. By having SEI handle the investor and investment cash movements directly, the firm no longer needs to spend the time tracking down wires and searching for confirmations.
- Automated workflow. The†workflow application is an automated system that electronically receives, stores, and directs data in a standard and controlled manner to each specific work group. Once there, the application tracks data, documents records, indicates processing stage, and points to future tasks. This technology improves accuracy and enhances transparency, continuity, and consistency for the firm, as well as provides an audit trail for risk management.
- Tax support. With a dedicated tax team, SEI has the tools and resources to remain current on requirements and regulations. The automated reporting also allows for smoother data gathering and filing processes.
With many of the day-to-day operational functions now performed by SEI, the firm is able to focus on its investor relationships and prospects without the distractions of middle- and back-office tasks.
Since the firmís seamless, on-time conversion of its fund accounting and investor servicing operations to SEI, the firm:
- Has almost doubled the number of its funds without growing its accounting staff
- Eliminated the need for multiple roles in-house
- Gained faster turn-around times of information requests
- Improved fund performance and investor-level reporting with more concise data and meaningful content
- Improved communications and trust with the firmís investors