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What does the modern day client want and expect from their fund administrator ? I think it ’ s more to do with the management of complexity . So take , for example , a long / short equity hedge fund , which was the genesis of hedge funds . Well , as they got bigger , the equity markets shrunk . There are about 10,000 fewer public companies than there were 10-15 years ago . They went into other markets , like private markets , private equity , private debt , distressed debt , real estate , or other asset classes , where they thought they could get better returns . But those are different asset classes with varying information and risk requirements . Therefore it becomes more complex , and it also requires more people . These are large , complex organisations and you being a great stock picker or great shorter is only one segment of your responsibilities – so you are leaning harder on the fund administrator . Madoff happened 14 years ago and really shone a bright light that you want to have people independent of the fund being the ones sending out your statements , calculating your NAV , auditing your marks , and your values placed on the different positions you have . Now there is a way better system of internal control , with separation of duties and being able to get you the information you want , when you want it and how you want it . You also have confidence it ’ s correct , accurate and up to date . Stale prices and stale positions are a death knell for an actively managed portfolio . as the mid-range and in the low-end of the mainframes , and within another few years , it ’ s as powerful as mainframes work . You ’ re not talking about counting raindrops here . Even if it ’ s a million or two million trades , if you ’ re doing a million instructions per second , it shouldn ’ t take that long . You get increasingly sophisticated software and even though the accounting also got increasingly sophisticated , the analytics went off the charts . People want to do Monte Carlo simulations , they might want to do 25,000 of them and that takes a lot of computer power .
It ’ s not going to be done with a HP 12C calculator and a pencil . That ’ s why the supercomputers and low latency , algorithmic trading and related processes you see in the market today are all computer driven – it ’ s not even having humans deciding yay or nay . The computer decides yay or nay . The humans set up what the parameters are , but the computers execute .
How is SS & C approaching its longevity as a leading fund administrator ? Staying on top of things means talking to your clients , prospects , employees , recruits and competitors . The focus is on really understanding the whole market , being willing to ask questions , and not being intimidated when you hear something and don ’ t know what it is . You need to understand and ask what the objective of the strategy is . Then , have the purveyor explain the risk and rewards to you and the high and the low watermark . You can make a lot of money if you go out to Las Vegas and put it on red , as long as it turns up red . It ’ s the opposite if it turns up black – so you have to ensure that returns are not made with outside risks . That ’ s why some of the asset classes that people get into , they have to be circumspect .
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