Fund admins need to create a standardised investor reporting data utility
Hedge fund administrators need to create a standardised investor reporting data utility, a leading fund of hedge funds has urged.
Such a utility would minimise the operational challenges of compiling different data reports for fund administrators. A consolidated data utility where the formatting of reports is consistent for all investors would ease the operational burden that reporting entails, said Greg Robbins, chief operating officer at Mesirow Advanced Strategies, the $13.5 billion Chicago-based fund of hedge funds.
“Such a utility would capture all of the data investors provide and store it in one place. It would enable investors to have a uniform subscription document. Investors have to supply so many reports and having a standardised data utility would be a huge benefit,” said Robbins.
“From an investor point of view, there is an enormous amount of information we need to provide managers. We need to provide hedge funds with data because of FATCA, for example. Furthermore, if managers take advantage of the JOBS Act, then there will be more data for accredited investors to submit. A standardised data utility would be incredibly helpful,” he added.
Investors are being forced to supply huge swathes of information courtesy of various regulations. FATCA, designed to clamp down on wealthy Americans not paying income tax, demands investors supply financial institutions where they have accounts with a host of data so as to enable the Internal Revenue Service (IRS) to ascertain whether that individual can be classified as a US citizen.
The JOBS Act, which eases the historical restrictions on hedge funds advertising and marketing their businesses, does force managers to verify their investors are accredited, presently defined by the Securities and Exchange Commission (SEC) as an individual with more than $1 million in investable assets. This will require investors to supply tax documentations or bank statements in what could potentially be quite onerous and intrusive.
A survey of 50 fund administrators by COOConnect in 2013 found 62% would be willing to invest in an investor data utility, with 60% of the larger respondents favouring a “not-for-profit” utility. There are concerns fund administrators could struggle to reach agreement although Robbins is optimistic. “The top 10 fund administrators already work with 90% of the world’s hedge funds and funds of hedge funds, so attaining an agreement could be done,” he said.