Manual processes are slow and prone to errors, and those associated with corporate actions are no exception. Errors associated with corporate actions carry a lot of risk because the impact of an error cascades down to every stakeholder—agents, custodians, investors, broker/dealers and fund managers. In fact, error processing is the most common type of risk stemming from corporate actions, with disruption to communication and the flow of information either up or down the chain. The impact of these errors can come in the form of late payments, disruption to cash flow, poorly informed front-office trading decisions and ineffective corporate governance.
There are many challenges to successfully navigating processes behind corporate actions. For one, timely access to the information needed to act on voluntary actions and make appropriate elections may be limited. Document collection for paydown notices from agent banks, or capital call and distribution notices impacting limited/general partnerships and other private transactions, is often non-standardized and manually-intensive. And, even when data, documentation and relevant events are presented, there is a need to manage the proper and timely election of corporate actions and events to ensure they are applied correctly to the right positions, portfolios and accounts.
These challenges increase operational costs due to added reconciliation burdens, where custodians, internal and external asset managers, accounting and reporting systems all need to be kept in sync with respect to the timing and processing of such actions and events. The impact on data integrity for reporting, modeling and investment decision-making increases the risk of errors and can often create additional delays in closing books for the accounting period. Automation is an efficient way to address these obstacles, but not without a solid understanding of the downstream interdependencies of the systems and parties impacted by such actions and elections.
When reviewing potential solutions, investment managers should look to technology and service providers that offer capabilities including:
- Systematic processes and controls, with online transparency.
- Automated sourcing and aggregation of corporate actions data from custodians and data vendors.
- Automated capture of voluntary elections from clients and seamless conveyance to custodians.
- Calculation of entitlements to be appropriately applied to the portfolio accounting system.
Today vendors such as SS&C have technology solutions that offer flexible, embedded workflow rules management and integrated market data feeds to automate the timely receipt and processing of both mandatory and voluntary corporate actions for specific accounts, portfolios or holdings. Furthermore, by partnering with an outsourcing provider that leverages technologies such as Optical Character Recognition (OCR), Natural Language Processing (NLP) and Machine Learning (ML)) to train models to intelligently and scalably collect, read, parse and process non-standardized event notices for loans and other complex alternative assets, investment managers can keep internal resources focused on core activities. If possible, it’s also best to work with technology and solutions providers that offer efficient, online multi-directional communication of voluntary actions - so that timely elections can be made where appropriate, and all downstream systems and interested parties can be promptly and seamlessly updated.
As an investment manager, the benefits of partnering with the right technology and service provider for efficient corporate actions processing are numerous, and may include:
- Streamlined workflow, eliminating reliance on custodians and their multiple portal systems.
- Improved communication & transparency between front office and investment operations teams.
- Centralized corporate actions processing with a single “source of truth” across the firm.
Singularity is SS&C’s next-generation, AI-driven investment operations, accounting and analytics platform, which offers integrated, automated corporate actions and voluntary elections processing supported by SS&C’s global middle-office infrastructure and operational domain experts. Singularity supports all asset classes on a single platform and can be deployed on a SaaS, fully outsourced, or co-sourced basis. To learn more about how automation can help you overcome the challenges associated with corporate actions and elections processing, download our "Flip the Script: Accelerated Back-to-Front Office Processing" whitepaper.
Alternative Investments, Insurance