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Optimising Fund Pricing Operations

With reference to the  ‘Unlocking Transformational Efficiency in Fund Operations’ posting on the Tabb Forum, Unit Pricing is a prime example of a function firms should invest in for continuous improvement. Conflicting business drivers of cost reduction and seamless capacity for growth have initiated a ‘back to core’ focus amongst many firms. Increasingly, successful operations require high levels of automation to create the necessary operational efficiency, driving economies of scale whilst reducing the operational risks associated with manual intervention

Unit Pricing is a repetitive multi-stage process, which carries a high operational risk and is subject to a strict compliance regime. Errors in Unit Prices can be extremely damaging from both a financial and reputational perspective. Rework and investor compensation may be applicable where the errors are either material or deemed systemic in nature.

The timely and accurate processing of underlying data within the ‘end-to-end’ operating model is fundamental to the successful production of the Unit Prices. The risks are exacerbated by increasing complexity in the form of multi-national assets, multiple valuation points, increasingly exotic asset types and fund structures and changes driven by the global wave of new regulation.

The control environment must be comprehensive and able to clearly highlight potential errors, with sufficient detail to allow rapid resolution. Exception based models may require no administrator intervention if transactional level data and fund performance hasn’t breached acceptable tolerances.

Automated workflow functionality now provides the most effective solution to monitor the status of each of the core components, increasingly being used to perform a wide variety of applicable functions within the unit pricing process, replacing the more manual and email procedures with powerful functionality.

Those firms which have opted for an outsourced solution face further pressure on the timeliness of Unit Price calculation as they must perform additional analysis in order to demonstrate that although the process has been outsourced, the responsibility for the Unit Prices has not been abdicated.

The most robust architecture occurs where Unit Pricing functionality is incorporated within the core investment accounting platform. Manual and semi-automated valuation and pricing processes are expensive, lack scalability and carry significant operational risks. An operating model that is driven by a highly integrated systems solution is most likely to achieve the required levels of operational efficiency and this should be the standard to which Fund Operations aspire.



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