FundCalcs was requested by a Fund Administrator client to deliver a solution for a monthly priced Fund of Hedge Funds for both the management fees and the performance fees.
Several underlying investments within the fund’s portfolio are managed by the same Investment Manager and these must be netted from the basis used to calculate the monthly management fee. For the performance fee, a cap is in place and the calculation method requires some of the underlying investments to also be removed from the GAV.
These calculations had not been possible in the existing Fund Accounting system and removed a high risk and time-consuming manual process.
FundCalcs operates a DevOps model which enables us to build effective customer solutions flexibly and in short timeframes. Our engineers work with operations, product and testing resources daily and all our team possess a range of skills to facilitate our model of faster software deployments.
Complexity
- Various Investments held within the fund’s portfolio are linked to the same Investment Manager of the relevant fund.
- All Investments linked to the fund’s IM need to be deducted from the basis from which the monthly fee is calculated to avoid ‘double dipping.’
- Management fee based on value of current month GAV net of ‘sponsored assets’
- Management Fee also calculated on a Tiered basis, depending on size of net GAV.
- Underlying Investments held within Funds Portfolio linked to fund’s IM must be netted against GAV before performance fee is calculated.
- Performance fees includes an interest rate hurdle
- Amount of performance fee that can be earned by the funds IM is capped as a % of the NAV of the fund.
- Automation not possible within clients FA system, making process time-consuming, manual and prone to error.
Operational Process
- Client provides FundCalcs with NAV and TA information on a monthly basis.
- Clients FA Team processes monthly calculations within the FundCalcs application.
- Clients FA Team reviews results and calculation breakdowns in browser-based user interface or in draft outputs
- FundCalcs application outputs a file containing finalised calculations to be uploaded to Client’s Fund Accounting System.
Reporting Requirements
- Management & Performance fee figures reported at Series, Class and Investor level
- Monthly calculation breakdowns
- Investor Statements – Formatted PDF’s
- Historic data queries
- Application allows for roll back and re-run of calculations
Implementation Process
- FundCalcs Analyst / Dev Team work with clients FA team to understand processes and requirements
- Allocation Sheets and Capital Activity inputs are analysed, and additional input files are collaboratively designed if necessary
- Calculations and Processing are defined for approval and SOW purposes
- FundCalcs Analyst / Dev Team implement agreed configuration
- Staged show cases demonstrate and allow refining of core functionality
- Phased delivery of operationally ready configurations are brought into operation by Client FA team