Introduction

Where an investment firm has engaged third parties to perform activities such as Fund Administration, Transfer Agency or Portfolio/Share Class Hedging, oversight is often performed by the investment management firm. Differing and high-volume review scans are required to be completed in very small time frames, with dynamic data. The data itself has value potential but can be laborious and error prone to make it so.

The Client

A leading Investment Manager and a Depositary Service Provider both required oversight of their Fund Administrators. The clients faced numerous challenges due to manual processes around the oversight and legacy unflexible reconciliation system, which didn’t provide the accuracy, automation or flexibility, to perform the oversight.

The Need

Manual or spreadsheet-based processes have the below challenges:

• Time Consuming: Time required increases relative to fund/class numbers and market volatility.
• Time Constraints: Oversight has a small window of completion to be effective.
• Inflexibility: Spreadsheets do not automatically adapt to a change in data and require ongoing maintenance.
• Data Redundancy: Data is lost or cannot be utilised in a fragmented or manual process.
• Error Prone: Reliance on manual reviews results in more misses that system driven checks.
• Resulting Actions: Any required follow up actions/escalations/monitoring are manual and rely on the user to do so.
• Quality Control: Producing independent KPI’s on accuracy, timeliness etc. of service providers is manual and time consuming.

Selecting EZOPS ARO®

EZOPS ARO was selected to address these challenges due to its robust capabilities in automating complex validation, verification & reconciliation of Financial Data. Oversight solutions available include:

• NAV Dissemination Check: A reconciliation validating that all prices due to market on a given day were released and identifying anomalies in NAV per share movement. Valid exceptions can be explained within ARO by referencing holiday calendars, class activity dates etc.
• Divergence Review: An automated review to ensure that divergence of daily share class returns has been correctly explained by the Admin.
• Fund Performance Attribution Review:  An automated to ensure that the movement of a fund on the given day has been fully attributed to prescribed buckets and there are no anomalies within the data,driven by business defined, flexible evaluations.
• Hedge Ratio Check: A review of hedging services provider report to ensure that the open hedge amounts on a given class are within a predefined ratio and flag out of tolerance amounts/days, with automated follow up for rebalancing.
• Swing Pricing Verification: A recon ensuring the swing decision applied is correct and the impact is in line with expectations. Uses Transfer Agency dealing data, Admin swing price data and periodic IM swing data.

The Outcome

• Automated Review and Exception Creation: Users can now define exceptions based on simple evaluations.
• Automated Escalation: Intelligent Process Automation (IPA), escalations,queries and follow-ups can be automated based on defined inputs.
• Flexibility: The low-code/no-code nature of EZOPS ARO puts the power in the hands of the business to tailor and change processes as required.
• Automated Reporting: Tailored reports can be created to auto-disseminate at required frequencies or on an ad-hoc basis.

This has led to the following significant results:

• Reduction in time required: Using an automated review process, the reviews can be performed much faster and can auto commence as soon as the data arrives from the third party.  
• Continuous Change:Users can adapt review rules independent when requirements change and there is no need to manually adapt processes for new funds/classes etc.
• Improved Accuracy: The risk of exceptions being missed is gone.
• Consistent and Automated Follow Up:The system allows for rule-based escalations and queries to be sent without a user intervening.
• Data Usage:Being able to review, store and report on the data from multiple third partiesin one place allows for value to be extracted from this data.

Conclusion

By adopting EZOPS ARO, investment firms are enhancing operational efficiency, improving data accuracy, and ensuring timely resolution of discrepancies, supporting their goals of accuracy and compliance.

We would like to open a dialogue with you around how EZOPS can help you meet or exceed your goals. Please contact us today.