Crypto and distributed ledger technology (blockchain) continue to evolve at breakneck speeds. Governments also are fostering this discussion as they investigate implementing their own Central Bank Digital Currencies (CBDC). More than 80 countries around the world are researching or developing CBDCs, and are at various stages of the investigating process. On January 20, 2022, the U.S. Federal Reserve issued a discussion whitepaper highlighting the features/benefits/risks of such a payment system and acknowledged they are actively investigating it. Some governments have already postponed or canceled projects, while many are still investigating the pros and cons, and others have already launched their own digital currencies.
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SS&C has remained closely engaged with the growing private credit sector and how the alternative asset class continues to evolve given current market conditions. The 3rd Annual LPGP Connect CFO/COO Private Debt forum will be held in New York City on Thursday, September 29, 2022, and will highlight practitioners providing valuable insights into future challenges and opportunities for firms.
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We recently hosted a podcast to discuss the tools investment managers need for an efficient trade matching process, as well as how to respond to changing regulations and what to look for in a service provider.
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Amid a variety of global events, 2022 has been a challenging year for many ESG investment strategies. Energy companies, most often associated with encouraging fossil fuel dependency, have performed well given the spike in energy prices driven by supply chain issues and the war in Ukraine. However, many ESG strategies screen out energy companies over concerns about their impact on climate change. At the same time, many ESG-related investment strategies have been overweighting allocations to technology stocks, which have performed relatively poorly for most of the year.
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The past 15 years have seen a surge in private equity in nearly every respect—in assets under management, the number of funds, managers and investors, the variety and complexity of fund structures, the size of the private company universe, and, most significantly, in private company valuations. Observers have called it a dramatic “paradigm shift” compared to the days before the 2008 financial crisis when private equity was a fairly closed society. Fueled largely by institutional allocators seeking superior returns to the public markets, private equity has gone mainstream as an asset class.
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What are the hallmarks of an optimized reconciliation process, from handling straightforward securities like equities to complex fixed income such as OTC derivatives, or digital assets? First, there’s instrument coverage and staff expertise across the asset class universe. Your service provider should have asset-specific expertise to map out the data points required to reconcile transactions, positions and cash balances. Second, world-class technology. Excel has stepped up its capabilities, but that’s still a manual process with the risk of human error—errors that can lead to bad information that can result in delays in break resolution and poor decisions due to lack of transparency. Artificial Intelligence (AI) is changing the reconciliation landscape, as it can reconcile a million rows in minutes, based on the complexity of the matching rules. Also, your service provider should be able to resolve exceptions using technology that can auto-match multiple sets of data. Finally, there’s transparency, to make sure clients can view the process and the data.
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Phase 6 of Uncleared Margin Rules is set to take effect within days, and we hosted an "SS&C Middle Office Series - UMR" podcast in which we discussed ways to confirm your readiness for compliance. The fast-approaching deadline doesn’t mean you can soon stop thinking about the changes, and it doesn’t mean you’re too late to take actions that will help your firm make the best decisions.
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On August 10, 2022, the Securities and Exchange Commission approved proposing rule amendments to expand reporting requirements for large hedge funds and private equity firms. In a 3-2 vote, the SEC proposed amendments to its Form PF to require hedge funds to provide additional information on performance, investment exposure, investment concentration, and borrowing and financing arrangements.
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