Buy Side Saying Goodbye to Manual Billing01.23.2013
For buy side institutors, the fee billing process is still a largely manual process even while other functions, such as reconciliations and settlements, have benefited from post-trade processing automation.
As the complexity of portfolios continues to increase, institutional investment managers are at a greater risk of losing revenue while still using an outdated fee billing process.
“We are a relatively small firm, but big enough to look at automating processes that would otherwise be handled manually,” said David Lunt, chief financial officer at Peregrine Capital Management, a boutique equity firm with $2.3 billion in assets under management. “We need to turn around invoices much more quickly. It’s not a question of improving cash flow, but more of a customer service issue, as our customers need to speed their own billing processes.”
Peregrine has implemented Quantum, a revenue management system for fee calculation and accounting developed by technology provider Electra Information Systems.
The system has enabled Peregrine to streamline accounting workflows and minimize operational risk with efficient and accurate fee billing, invoicing analysis, accounting and reporting.
Peregrine has been an Electra customer for 10 years, having implemented the company’s STaARS reconciliation system and RecCollect data collection and aggregation system. It found the idea of automating the fee billing process intriguing, and agreed to serve as a beta site for Quantum.
“RecCollect is a service that collects our monthly holdings from our different custodial banks, which gets imported directly into STaARS,” said Becky Loeffelholz, business systems consultant at Peregrine Capital Management. “We do reconciliation in STaARS, and we use the monthly holdings information for invoicing.”
Lunt added: “They have direct connections to custodian banks, so the infrastructure was already in place. It was a logical extension for them and us.”
For Electra, Quantum, which is available as either hosted or installed software, is a natural extension of its buy-side back office orientation.
“Our mission is to help hedge funds and institutions automate post-trade processing systems, such as trade settlement, reconciliations and data collections from custodians, prime brokers and sub-advisors,” said Ian Danic, managing director at Electra Information Systems. “Quantum is the next step in the information flow. It’s very important for investment mangers to be able to figure out what clients owe them.”
Electra processes information on over $2 trillion in cash and securities daily. Its customers include investment managers, hedge funds, insurance companies, plan sponsors, custodial institutions and banks.
Fee billing and revenue management has been somewhat of a poor step-cousin in the post-trade processing world, left behind while other functions have become automated.
“While there’s been some attention to automating the settlement cycle and reconciliations, fee billing has been left out, with the result that lots of companies are still using spreadsheets,” Danic said. “It’s a painstaking yet important process, where accuracy is paramount, as you don’t want to send out incorrect invoices.”
Investors are seeking the tax efficiency, trading flexibility and cost benefits of ETFs.
US Department of Labor has allowed pension plan fiduciaries to consider ESG factors.
Goldman Sachs Asset Management agreed to pay a $4m penalty.
FINRA membership marks further momentum in WisdomTree Securities' digital strategy.
The prior administration’s restrictions on retirement plans and ESG were removed.