New York, January 14, 2021
2020 was a year that shook the economy, the markets and our personal lives as working from home became the new norm. The fund market made big changes to adapt quickly and the industry has proven itself to be robust. Below, Centaur’s senior management team outlines six predictions that are expected to impact on the industry in 2021 and beyond:
1. GREATER FOCUS ON ESG, DIVERSITY AND INCLUSION
Karen Malone, Founding Partner of Centaur Fund Services
“Environmental, social, and corporate governance (ESG), along with diversity and inclusion, have been on an upward curve for years and, as practitioners, we have seen a huge increase in discussions about ESG among our client base and industry peers. As more and more investment managers and service providers see ESG as forming an integral part of their investment process, those that ignore ESG risk being left behind.
Rather than regulation driving it, we are finding that much of this change is being driven by investors who are increasing their demands for accountability: Investors and investment managers want to work with service providers that take responsibility for the services they provide. They need quality ESG data, not solely to demonstrate compliance with regulations or to tick the right boxes, but to achieve their own ESG objectives and to genuinely meet their investors’ investment needs and demands.
The Black Lives Matter and the #MeToo movements brought diversity to the forefront of many industries in 2020. Added to this, COVID-19 brought about a massive transformation to the workplace as people moved to working from home. For firms with a strong diversity and inclusion program, such as Centaur, the transition was smooth.
As a strong advocate for diversity and flexibility in the workplace, I am delighted to see that finally, we are seeing real effort with ESG initiatives, including diversity. It has been proven countless times in recent years that teams that bring different outlooks, backgrounds and experiences into the mix can contribute greatly to the success of a firm.”
2. HYBRID FUNDS ON THE RISE AS THE LINE SEPARATING HEDGE FUNDS AND PRIVATE EQUITY FUNDS BECOMES MORE BLURRED
Ronan Daly, Founding Partner of Centaur Fund Services
“Until relatively recently, hedge funds and private equity funds were treated as two distinct alternative investment categories: Open ended hedge funds or closed ended private equity funds. With rare exceptions, there was almost no overlap between the two. This has changed fundamentally over the past few years as the market has seen an explosion in hybrid funds. We are seeing increasing numbers of hedge funds displaying many of the features of private equity funds, such as being closed ended, having limited liquidity and performance fees only payable
on asset realization, while private equity funds are displaying hedge fund features by investing in many liquid asset classes.
The convergence of hedge funds and private equity funds has been accelerated by COVID-19 as funds seek ways to diversify and scale their business. This trend is set to continue in 2021 as investors explore ways to gain higher yields by diversifying their service offering.
To meet these needs, fund managers and their service providers must adapt their infrastructure to be able to service these products, using processes and technology which combine features of hedge funds and private equity funds. Rather than supplying a suite of individual products, Centaur acts as a single source, delivering administration solutions designed for each client, covering both hedge funds and private equity funds. As a result, we have attracted a number of credit and loan focused funds in the US and Europe driven by the increasing demand for administrators to deliver a hybrid solution that incorporates elements of both private equity and hedge funds.”
3. FIDUCIARY AND REGULATORY PRESSURES WILL CONTINUE TO INCREASE
Eric Bertrand, Founding Partner of Centaur Fund Services
“Regulatory and fiduciary pressures have increased over the past few years as the demand for transparency grows. It is a big concern for fund managers and GP’s as they continuously grapple with the complexities of new and amended fiduciary and regulatory requirements. AML / MLRO, AIFMD, FATCA and CRS are just some examples of highly complex regulations that now impact Hedge funds. Further fiduciary and regulatory activity are only set to increase at the sectoral, national and international levels over the next few years.
Centaur’s comprehensive range of fiduciary services enable our clients to enjoy independent, professional services that ensure they navigate successfully through regulatory, investor requirements and best practice.
As the regulatory framework increases, fund structures have become far more complex than ever. Third party fund administrators can handle the demands of more complex structures using multiple jurisdictions and legal forms, in a manner which is very difficult for managers to achieve on their own. They also have the specialist knowledge to fulfil growing reporting demands while reducing operational risk to ensure funds can focus on their core competencies of investing and generating returns for their investors.”
4. CUSTOMER SERVICE IS STILL ABOUT THE PEOPLE
Des Johnson, CEO of Centaur USA
“I have no doubt that the most important differentiator for fund administrations is an exceptional client experience. There is no doubt that Centaur’s investment in technology over the past decade has proven its worth in the past year as we handled the necessary infrastructural and reporting demands that arose with COVID-19.
Centaur has always invested heavily in technology which has become critical to client service. We are proud to offer immediacy, personalization and transparency, all on an accessible and secure platform. However, person-based client service is still the bedrock of our business that works alongside technology to provide advice and assistance based on experience.
At Centaur, we have the technology platform to fully support our clients. Centaur acts as an extension of the manager / GP, getting on the phone with them to discuss best practice, how we have seen others resolve issues, what we have learned from prior crises etc. This is in sharp contrast to many competitors who are relying solely on technology platforms. Exceptional client service runs through every aspect of our business and reflects the increasing demands of clients. During the coronavirus crisis, no less than a complete understanding of the client has become a prerequisite for successful administrators. This commitment to delivering a quality client experience that continuously evolves with our clients will drive Centaur’s business into the into the future.”
5. BOARDROOMS WILL STAY CONNECTED, EVEN DURING A CRISIS
Gavan McGuire, Partner of Centaur Fund Services
“A positive development that has arisen in 2020 is the mainstream move towards virtual meetings. Over the past few years, more and more board activities have been taking place online, with companies using virtual boardrooms to stay connected. The advantage of remote boardrooms is that they bring diversity to the meeting by easily bringing together the expertise of individuals from different jurisdictions and perspectives.
Naturally, where allowable, the use of virtual boardrooms has increased dramatically with the pandemic and we are seeing major decisions being made remotely. During any time of crisis, it is vital for board members to be able to continue to assemble seamlessly to make decisions. This can be done in many ways, such as hosting virtual board rooms and delivering accurate and timely reporting.
Fund administrators with corporate services specialists are stepping up to the plate by, offering virtual platforms for boards to meet. Additionally, accurate and timely reporting is essential during periods of such volatility. Fund directors need to be able to rely on real-time access to reporting through portals where they can drill down into data at any time and across multiple jurisdictions with complete transparency. These are just some of the services that fund administrators can offer should any crisis arrive today and into the future.”
6. FLEXIBILITY IS THE NAME OF THE GAME FOR SUCCESSFUL ADMINISTRATORS
Antonio Frias, CEO of Centaur Luxembourg
"Covid-19 was a game changer for 2020 with regards to flexible working and our way of communicating, both personally and professionally, has massively changed for the long term. At Centaur, business continuity rapidly turned business-as-usual as we quickly realized the benefits of the move towards mobile working, such as improved productivity, greater flexibility and of course, radically reduced commute time.
There have, of course, been immense challenges for teams working from home during the pandemic, such as the lack of social interaction between colleagues. However, as teams are encouraged to work from home, we have learned that remote working works and employees can be productive and engaged.
One thing that is clear from the Covid-19 experience is that flexibility has become the name of the game. Last year, progressive administrators quickly adapted to remote working and flexible work hours. Centaur already had the tools, technology and training in place to communicate and collaborate remotely, so we hit the ground running when the COVID-19 restrictions hit. Centaur does not outsource client services and as a result, our teamwork remains as good in person as it is virtually. Our team seamlessly embraced remote working and are remaining 100% focused and committed to our clients.
Implementing long term policies takes commitment. At Centaur, we believe in the importance of human communications and encourage our teams to connect over shared interests. This is currently done through a range of technology platforms. Successful administrators must constantly adapt to market forces and diversify their service offering accordingly. Covid-19 brought flexible working to our lives in 2020 and I have no doubt that this trend is here to stay on some level for 2021 and beyond. For our part, Centaur is embracing the positive sides of these changes to ensure that diversity remains fundamental to the firm."
Over the course of 2021 we will track developments in each of our five predictions and will dive deeper into each topic throughout the course of the year. To join our mailing list, just send an email to firstname.lastname@example.org.