Your Edge, The Blog by Netage Solutions

Upcoming SEC Compliance and Software

Netage Solutions — Fri, 10 Feb 2012 23:13:57 +0000

We’re a month into 2012 and things are looking up for the alternative assets industry compared to 2011. While many articles crossing my desk indicated that albeit 2011 was a disappointing year for many hedge funds, there appears to be a deviation from the year priors trend, as LPs are continuing to look to them as a viable investment, now coupled with the biggest monthly gain in over a year.

Also new in 2012, and perhaps more pressing, are the soon to be enforced SEC compliance requirements for an increased number of investment advisers and their respective firms. With the filing deadline looming on February 14th (per the small print) for the federal registration deadline required on March 30th, we’ve seen an increase in compliance based questions as of late. While the typical pain points we provide solutions for are geared towards facilitating investor relationship management and investor transparency demands, as we get closer to the deadline, SEC mandates and the consequent fees for violation are taking priority. From many conversations based upon how we can facilitate a smooth transition and extend transparency for assisting in SEC compliancy, I wanted to share some of the take aways that both current and prospective clients may benefit from when evaluating both current and future resources.

While investment advisers across the US with assets in excess of $100 million, and particularly those in New York with over $25 million are obligated to register on a federal level (all others needing to register with the state – Wyoming being an exception with every adviser needing to register with the SEC), their firms are running into issues in supporting the new burden of internal oversight for compliance. For firms that manage more modest amounts, yet still require federal registration, the obligation to hire a Chief Compliance Officer comes at too great of a cost, and rather than dedicating an individual, the requirements of the position and compliance oversight is delegated to a more junior employee. This can prove a difficult path to traverse, and as we are starting to see, firms in such circumstances are finding an earlier need to rely on solutions to help facilitate meeting compliance based needs, and technical requirements – the costs associated with supporting new technical infrastructure is another story altogether.

With mandates to retain e-mail communications for five years, easily accessible for the first two years, existing clients are now counting on some of our logging features to ensure that they are able to track all external LP communications and documents. Beyond the basic storage of investor correspondence, one of the greater value-adds for anyone to seek in a compliance-supportive system is the provisional access to documents and audit trail. If an SEC audit requires a review of your investor correspondence, Dynamo can provide you with an audit trail of record edits, in addition to more granular details regarding the access of specific documents.

As we step into a period requiring greater disclosure, an additional point of major consideration is the monitoring of relationships where a potential for conflict of interest might lie. Dynamo is well suited for tracking relationships across multiple vectors and there has been some interesting usage of our platform by some our clients. One relevant example that comes to mind is a client that compares lists found on OFAC to fundraising opportunities and contacts within Dynamo™ to ensure there aren’t any current or future conversations with OFAC listed individuals which would be in violation of US law, and a conflict of interest, thereby earning the unwanted attention of the SEC. Another example that comes to mind, is that of a client who provides Dynamo access to their auditors to facilitate relationship tracking across all contacts, expediting the process to ensure there isn’t any overlap in business relationships that may provide grounds for a conflict of interest.

As we continue to work with our clients heading into a new era of SEC mandated compliance, we’ll look forward to hearing from you about some of the unique challenges you face, to ensure that we continue to provide the best solution to fulfill the growing needs of an industry facing new challenges.

Also, and on a final note, in the event you’ve put off filing, you should make sure that you file Form ADV by February 14th to ensure you meet the registration deadline.

Krassen Draganov, CEO

Investors are hungry for more than you think.

Netage Solutions — Thu, 05 Jan 2012 18:42:22 +0000

Guess what? It’s not always money.

As we at Netage do our best to keep a pulse on the industry and trends, we’ve read several reports over the last few months from industry peers quantifying the decline in investor transparency.

Back in August our friends over at Clear Momentum conducted a survey of Investment Deal Teams (which you can find here). There are a number of really great takeaways, but the polarized perceptions of GPs and LPs was really the most striking. To summarize, and perhaps unfairly to the greater content of the report, GPs hold confidence that they are satiating the demand for transparency, while LPs are hungry for more. This isn’t the first such report we’ve seen, as there are several others independently authored that reach very similar conclusions. Thus, we have the consistent issue of fund managers reporting less, but operating under the assumption they’re providing more than enough information.

As we’re privileged to have over 200 firms as clients, one example stood out to me while contemplating this dichotomy between our clients and their investors.

One of our private equity clients approached us for a solution that could facilitate immediate access to the information that their LPs wanted, and when they wanted it (the latter being of the greater importance). We suggested that they leverage their existing Dynamo CRM bundled reports, and securely share them with investors through our Online Investor Reporting product. By offering their LPs the opportunity to define several metrics within reports, our client was able to ensure that individual LPs could easily find the information they wanted, when they wanted it, all without relying on the firm’s investor relations personnel taking time to crunch through calculations and disseminate reports.

As an unexpected benefit, our client found that they were actually able to spend a greater amount of time opportunistically calling investors to further fundraising efforts, while commensurately engendering goodwill by assuming a more proactive role.

While we’ve tried to easily facilitate and automate some of the more labor intensive requirements of the process, it would be foolish to say there is a complete solution. At the heart of investor relations is the relationship itself, which clearly needs to be carefully maintained – particularly given the polarized perceptions indicated by the studies cited above. While this anecdote is just one example of how we’ve seen the divide between our clients and their LPs bridged, it’s not the only way. It basically comes down to finding a win-win solution, which in this example allowed our client to:

Offer investors global access to the unique information they want, when they want it, and
Free up internal resources to capitalize opportunistically on investor relationships, or divert newly freed resources to internal priorities.

Essentially, by meeting LP requirements while freeing up internal resources, it’s entirely possible to fulfill the appetite for increased investor transparency, and take more off your plate to make room for the needs that you and your firm would prefer to focus on.

Kevin White, Director of Client Relations

LOOKING FORWARD

Netage Solutions — Thu, 29 Dec 2011 18:00:57 +0000

At Netage, we have over 100 years of collective experience building sophisticated CRM solutions for the alternative assets industry. We’ve seen bubbles burst, economies boom, and stock markets bust, but through it all we’ve maintained our passionate dedication to this unique industry. While I’d like to say that our success is predicated on our track record, it really is a product of our ability to innovate, differentiate, and adapt to the forces that shape the needs of our clients each day. I hope that in the pages of this blog, we’ll be able to share many of our thoughts and ideas about how we intend to keep doing this, and to impart some of the excitement that keeps driving our products forward, while so many vendors in this space stay rooted in the past.

Specifically, you can expect regular updates about industry developments and best practices written by both Netage staff and peers within the industry. Fair warning: we are a tech company, and we are also a financial services company, so we’ll leave you to pick and choose those topics that interest you the most. To this end, we’ve tried to make it easier to search subject matter via the bars on the right. And you can stay informed of new content and industry news by subscribing via e-mail, RSS, or following us on Twitter and/or LinkedIn.

We have quite a few bloggers lined up comprising colleagues, clients, and industry thought leaders, and I hope you’ll continue to stop by and check out our stories and ideas. And most important, we’d love to get your feedback on past posts, as well as your suggestions for future ones. We look forward to hearing from you.

Stuart Sheppard, Managing Director