Overall the industry has “weathered the storm” better in the COVID-19 crisis than prior dislocations, but volatility once again brought about similar challenges on investment managers’ treasury functions, according to a new report from Northern Trust Alternative Fund Services (NTAFS) and Hazeltree.
The report, which investigates the impact of the ongoing COVID-19 pandemic on alternative asset managers, explained that in order to combat new concerns faced by investors, it is important to have robust processes and technology in place to manage cash, liquidity and collateral in the work from home operating model.
It also recommended measures to ease procedures, such as centralised automation and monitoring of all cash movements processes, systematic authentication for wire activities, and full audit trail tracking of all cash movements.
Particularly, it was noted that fund managers must have the necessary teams to manage and control new challenges to the treasury, such as increased cyber attacks on cash/wire movements, increased margins calls and disputed market valuations, and monitoring of unencumbered cash.
The report advised asset management firms minimise their exposure by imposing limits on how much cash can be maintained by any one counterparty, as well as implementing technology to manage cash positions, eliminate reliance on manual spreadsheets, and reduce the risk of human error.
Additionally, it highlighted that the ongoing COVID-19 pandemic is not yet over and investment managers should take action to ensure that their treasury teams are effective for this or future challenges with improved automation and capabilities for decision making.
Peter Sanchez, head of alternative fund and Omnium business services at Northern Trust, commented: “Asset managers faced pressure beginning in March, not only from market volatility, but also from needing to execute on critical operational functions in a work-from-home environment.”
“The challenges highlight the importance for alternative fund managers to have the scalability, security and systems to operationally manage such a crisis – whether in-house or through a partnership with a fund administrator.”
