Hedge funds saw improved levels of service during the peak of the COVID-19 pandemic from their fund administrators, as client service and onboarding were among the highest rated services in Global Custodian’s annual survey.
According to the GC Hedge Fund Administration 2020 Survey, client perception of global hedge fund administrators improved in all service categories over the course of the year.
Some of the most improved service areas rated by hedge funds include Client Service, KYC, AML and Sanctions Screening, On-boarding, and Reporting.
The positive scores come as many hedge fund clients relied on their administrators to weather market turbulence and provide support for their own business continuity plans. A spike in collateral margin calls and a sharp increase in trade processing volumes were among some of the key issues hedge fund administrators faced at the height of the crisis.
Surveying the market environment, one global fund administrator suggested the COVID-19 pandemic has stress-tested fund managers’ confidence in their service providers.
“Firms have universally shifted to a remote, work-from-home model, causing potential regulatory implications sourced in the stress on the manager’s operational and strategic activities, key-man risk, infrastructure challenges like internal staff capacity limitations, and the downstream impact of delays in NAV processing,” said the firm.
“[We] experienced a substantial increase in queries about services supporting the specific needs prompted by current events.”
Another bank-owned fund administrator added that the pandemic had also accentuated certain industry trends, as average management and performance fee rates reached new lows in 2020.
“Hedge fund administrators are feeling this same pressure as managers look in turn to their fund administrators to reduce costs,” the bank said, suggesting that this industry pressure on costs continues to drive managers towards consolidation in their service provider relationships.
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