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Portfolio > Alternative Investments

Solving the Alt Investing Reporting Problem

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When you look at alternative investments, you can’t help but see how significantly their use has increased. In the past 12 months alone, there has been a double-digit increase in the use of alternative investments, including hedge funds, private equity, REITS, managed futures and the assorted other types of investments that comprise the category. 

There are many diverse types of users—RIAs, family offices, broker-dealers, private banks, pension funds, endowments and foundations, to name a few. But there is a common operational challenge that is shared by all of them—namely, the pressure to provide client statements and reports with greater speed, transparency, accuracy and level of detail than ever before. 

This challenge is being fueled by recent advances in technology, a development that prompts clients to expect a corresponding improvement in the quality of data and level of service they’ll receive. If your firm is using alternative investments, you may have personally experienced this rising tide of client expectations yourself. 

The Lingering Problem of Manual Data Entry

For many firms, reporting methods for alternative investments have barely progressed at all in the past few years. Today’s firm may still be using manual data entry as it collects data that is supplied via an Excel spreadsheet or PDF, or sent through the mail as a paper statement. These firms may even be retrieving data manually from the web site of the fund/investment in question.

In each of these cases, the “old fashioned way” requires intensive labor and countless people-hours—not to mention the fact that it opens up the possibility for human error and embarrassing delays. That holds true whether your firm is making data from custodians/prime brokers available to your clients on a weekly, monthly, quarterly or some other basis.

The bottom line is that it can be a painful process for you—and it’s not likely to get any better as the use of alternative investments continues to trend upward. 

Data Aggregation Can Solve the Problem—Entirely 

Fortunately, there is a solution, and it comes down to applying the right technology to the challenge at hand. In this case, by using a third-party data aggregation service, you can get an electronic feed that supplies you with all the reporting data you need—without the manual data entry time and resources that have proven so costly over the years, or the likelihood of a human transcription error that can mar a client relationship. 

With data aggregation technology, you can speed up the reporting process to a decisive degree. In the instance of a capital call, for example, you want to ensure that clients have the information they need—when they need it.

Naturally, it’s vital that you find a solution that is thoroughly compatible with your reporting system. That’s why you’ll want to carefully review the credentials and capabilities of third-party data aggregation providers before making a decision. 

An Invitation 

In considering the switch from manual data entry to a data aggregation solution, you may find yourself asking, “What are the other guys doing? What are my competitors up to?”

My firm, ByAllAccounts, is conducting a Q4 2012 Alternative Investments Survey, in conjunction with Millennium Trust Company, on reporting and servicing trends in alternative investments. We’re seeking to gauge anticipated changes in how you can achieve even greater efficiency and transparency in your reporting.

You may wish to take the survey yourself to receive an executive summary of the results in December. Compare yourself to other alternative investment users, asset managers or service providers…and prepare for the alternative investment challenges and opportunities ahead.


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