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07 April 2020

Multi-Manager Fund Structures Grow and Operational Challenges Grow with Them

By Marc Flamini and Nicholas Nolan

In the last several weeks, J.P. Morgan Asset Management, Eurizon, AI – Funds Limited, and Russell Investments, have all launched new multi-manager funds. These funds focus on everything from sustainability and ethical investing, to pensions, and real estate investing. While the multi-manager fund structure is in no way a new approach, the increased emphasis on diverse strategies creates unique workflow challenges.

Diversification in portfolio strategy is one of the key benefits in this structure - and a driving factor behind all the momentum - as it limits the fund’s exposure to any one sector and offers more opportunity to generate alpha. By consolidating the offerings of many investment managers within the same fund, firms are able to incorporate expertise in different asset classes, as well as well as diverse styles and strategies.1 Moreover, by providing portfolio managers with their own P&L statements, funds are better able to track performance of each investor and its strategy.

For new launches employing this approach, there are several nuances to consider. Multi-managers can use complex full pass-through fee structures to underlying portfolio managers. In some cases, a fund can have a master/feeder structure, as well as a separately managed account, trading in equity and equity swaps. All these choices can result in operational and infrastructure nightmare.  

SS&C Advent’s Geneva provides peace of mind for multi-managers and investors with complex fund structures. Beyond being a real-time portfolio management and accounting solution, supporting swaps, equities, futures, and forwards, Geneva’s functionality includes the ability to view books by portfolio manager, as well as by custodian. Geneva natively allocates expenses down to the portfolio manager, seamlessly through robust expense fee calculator and an allocator.

With built-in functionality, Geneva removes nearly all manual processing, streamlining swap and equity lifecycle events. Firms can natively accrue and generate cash flows for all investment types without workarounds. Finally, Geneva offers robust managed services that handle all the day-to-day tasks of hosting and managing software or operational workflows including reconciliation with administrators and prime brokers.

With Geneva, multi-managers can eliminate significant operational pressures and focus on opportunities and strategies to profitability serve their clients.

Sources

[1] MassMutual Funds. The Multi-Manager Approach – A Better Fit for Retirement Investors. Retrieved March 19. https://www.massmutual.com/mmfunds/The-Multi-manager-Approach-A-Better-Fit-for-Retirement-Investors.pdf