Crypto assets are reshaping the way market participants of all sizes are thinking about trading and investing. With this rapid growth has come an increase in the number of investors, execution venues, transaction volumes — and the inevitable operational challenges. How these challenges are dealt with will determine how investors navigate this nascent marketplace and how each of those players scale their businesses.
Fund administrators are critical to support hedge funds, running the middle and back office operations and bearing the brunt of time-consuming reconciliation and reporting processes. They play an essential role, yet the rapid growth of crypto has put more on their plate than they likely reckoned for.
Identifying the Pain Points
As fund administrators commence and continue to support hedge funds, challenges abound. Two major obstacles include:
- Connectivity: Building and maintaining access to decentralized and distributed crypto data venues is a time consuming and expensive process.
- Data Normalization: Standardizing, mapping, formatting and transforming raw data into usable information takes countless hours of manual effort.
The list goes on, but there is a broader challenge that underscores all of these: time. The manual processes that fund administrators have to perform in order to connect, aggregate and process data takes a great deal of time that could otherwise be used for revenue-generating activities.
Luckily, solutions are emerging. Technologies are now available to automate these manual processes, improving and simplifying data collection and normalization to yield accurate data.
In addition to improving the day-to-day routine for fund administrators, these types of services also prepare emerging funds and companies for various compliance processes, such as those required by institutional investors, external auditors and regulators.
Automation Is Key
For fund administrators, there is a responsibility to report accurate data from both a performance and compliance perspective. In our view, automating manual processes is the significant driver to reduce the risk of errors while increasing the auditability of the underlying data. The bottom line is that just as investment activity in the traditional market is efficiently reported and audited, the same will inevitably be true for investments in crypto, which means it’s vital to automate processes from the start.
Bridging the Gap
As the crypto asset ecosystem continues to grow at a rapid rate, fund administrators, and the industry, broadly, need clear, accessible processes in place to meet required financial reporting requirements. These solutions will enable scalability and support sustainable growth and profitability. With the right partners and technology in place, the sky’s the limit for fund administrators and Libra looks forward to helping them grow these new businesses.