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How shadow accounting can boost investor confidence

13 September 2022

Roshi Singh Dandona

Global Head of Hedge Funds

Roshi Singh Dandona

Global Head of Hedge Funds

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In testing market conditions, investors demand more transparency and greater control. Shadow accounting services can play a big role in bolstering their confidence

The ever-evolving hedge fund world is continuing to deal with the era of the Great Resignation. Fund managers are moving to hybrid structures and using complex asset classes to secure lucrative investments amid a large amount of market uncertainty.

As investors continue to seek the right balance between return and risk, it’s critical for any fund to be able to showcase scalability as well as an ability to handle complexity, exercise control and produce good returns.

As a fund grows in volume, it is more likely to expand into more asset classes across geographies. As a result, the high degree of control and clarity of reporting – which is fundamental to investors – becomes even more onerous for the manager to maintain.

Technology and people play the most important roles in ensuring scale, control and reporting.

Hedge funds haven’t been immune to the impact of the Great Resignation. In fact, they have been losing people and are constantly having to retrain new employees to stabilise operations.

It’s increasingly a challenge for firms to ensure they are able to conduct all back-office functions in-house. Leveraging specialised shadow providers has proven to be a smart alternative that many fund managers have resorted to.

The importance of accurate data for hedge funds

These days, data is everything. Good control of data is key to healthy operations and good investment decisions. More importantly, it goes a long way in boosting investor confidence through enriched and quick reporting to investors.

The foundation of risk and control in hedge fund operations rests on the granularity of the data available. Making the wrong operational or investment decisions can be costly and will make the investor shy away – something fund managers never want to see. Investor trust and raising capital go hand in hand.

Not only has shadow accounting helped fund managers scale and provide enriched reporting, it has also helped solidify confidence during times when scams have shaken the investor community.

A good shadow accounting service provider can add significant value to the fund by providing “operations data insights”, scale, competency and good practices. All of which goes a long way in helping to fine-tune controls and manage risk.

Essentially the shadow accounting service provider works as an extension of funds’ middle and back offices.

Operational transformation

The expanse of the shadow accounting also determines the degree of dependency the fund has on its administrator.

Absolute control of data and process allows funds to define their destiny with reporting. It also enables operational transformation as the fund manager expands the geography of investment across the wide spectrum of asset classes.

Shadow accounting is not only a four-eye check on the administrator. It’s a health check barometer that a back office can showcase to investors.

Outsourcing shadow accounting to an experienced provider allows hedge fund managers to invest with confidence. It also provides assurances to investors without having to spend time and effort building or rebuilding in-house teams.

For larger firms with multiple funds, it can simplify complexity and add scale. And for new funds, it can put investors’ minds at ease by showcasing the experienced people that are handling the back office.

How Intertrust Group can help

  • Intertrust Group is a publicly listed company with decades of experience in handling operations, middle office functions and accounting for funds around the world.
  • Our end-to-end shadow services can help you scale, enrich reporting and enhance controls.
  • Our wide experience in the funds space allows us to bring in best practices across asset classes and processes – providing you and your investors with confidence.
  • Technology is the backbone of what we deliver. We’re a technologically agnostic shadow service provider, giving funds the flexibility to choose and adopt the tech they need while we support the business function.