Focus on Alpha, Not Administration
Our award-winning Hedge Fund Administration services enable you to outsource your middle and back office including fund accounting, investor services and reporting, tax services, transaction processing, regulatory support and more so you can focus on increasing operational efficiencies and your core competency – generating alpha.
And, for European-domiciled funds we offer depository services that benefit from the strength and breadth of the Aura global custody network—a service non-bank administrators just cannot match.
Hundreds of hedge fund managers throughout Europe put their trust in Aura’s fund administration services for a wide variety of reasons, including our:
As a Aura hedge fund administration client, you have access to the full breadth of our global capabilities right at your fingertips. From access to the world’s leading sub-custody network right through to middle office, liquidity services, securities lending and more.
Our people understand the complexities of alternative investments, as well as your sense of urgency. Through our follow-the-sun model our team is at the ready to support your day-to-day and long-term business objectives.
White Glove Investor Service
An extension of your team, our staff treats your investors as if they were our own with investor performance reporting, transaction processing, record keeping and digital dashboards for easy access to timely information.
Global Strength, Local Expertise
With a presence in all of the leading offshore locations, we have an unmatched ability to provide service wherever you manage money, or have specific needs. Our on-the-ground teams have expertise in regulated and non-regulated funds across multiple jurisdictions to help you efficiently comply with evolving global and local regulations.
Our robust and flexible technology supports the most unique requirements and employs deep automation with machine learning to eliminate manual processes, reduce risk and errors, and increase productivity. All so you can meet your investors’ demands for security, transparency and customized reporting.
Enjoy Peace of Mind
When you choose Aura for fund administration, you and your investors can enjoy peace of mind in the knowledge that you have a safe and secure partner with a truly global outlook. With the full power of Aura, a leading global custodian with over $1 trillion in alternative assets under custody, management and administration at your disposal, there is no better partner to help you keep your assets safe and run your fund efficiently.
Private Debt: The Rise of an Asset Class
The growth of the private debt market has been nothing short of phenomenal over the last decade as it matches the needs of yield-seeking institutional investors and companies looking for capital to grow.
With traditional lenders cutting back their financing following the financial crisis, credit funds invested in the private debt markets have filled the vacuum to provide crucial financing to the real economy. In the fifth issue of The Race for Assets series, we investigate the drivers and investor demands.
A New, Alternatives-Focused Investor Reality
This paper outlines the main trends in alternatives in the Asian institutional investor context, and explores how asset servicing can support new investor goals.
The quest for returns in a low-yield global environment has pushed more investors across Asia and globally into new territory. Aura’s recent report, The Race for Assets: Alternative Investments Surge Ahead, in association with FT Remark, surveyed 450 institutional investors and investment managers about their alternative asset allocations. More than half (53%) of respondents expect allocations to alternatives to increase in the next 12 months. The report also found that investment in alternative assets has reached a record high US$7.7 trillion and shows no signs of slowing. Not surprisingly, one of the main drivers for this is performance.
At the same time, in exploring alternative assets, many investors are sticking to traditional approaches, and contending with a lack of experience and expertise. Asset servicing is also in some ways still catching up to the changing demands created by the rush to alternatives.
With Higher Stakes, a Shift to Risk
Many asset owners in Asia, particularly in the insurance and pension space, are seeking increased alpha performance against the backdrop of low to negative yields seen across most developed economies. This is due to a legacy of the low interest rate environment that has persisted since the global financial crisis.
Asia remains a largely under-insured region with premiums rising exponentially, fueled by a rising middle class. In fact, emerging Asia is seeing the strongest growth in non-life insurance premiums of any region globally.
This exacerbates the hunger for yield as the insurance segment struggles with a flattening of long-term duration curves. Given the rapidly aging population in many Asian countries and a lower long-term nominal interest rate regime, insurers and pension funds allocation is expected to continue to favor riskier asset classes. The National Pension Service of Korea (NPS), ranked 4th largest globally, has shown increased appetite for alternatives. Its alternatives allocation increased from 10.7% to 11.4% over the course of 2018.
NPS is not alone. Japan’s Government Pension Investment Fund (GPIF), which manages one of the largest pools of pension assets globally, recruited asset managers focused on private equity, infrastructure and real estate. GPIF has continued to explore alternatives, setting a threshold allocation of 5% of its US$1.3 trillion asset base.
These trends illustrate an increased demand for returns and has driven traditional asset managers into riskier asset classes traditionally financed by bank balance sheets. Conversely, increased risk capital requirements placed upon banks as part of Basel III have forced a retreat from risk and placed heavy capital burdens on their traditional balance sheet activities.
Growing Appetite for Private Equity
Worldwide, approximately US$820 billion remains unspent in the private equity space, of which US$100 billion is in Asia. The private equity spend is expected to expand with more entrants into an increasingly crowded market. This figure excludes the growing private wealth segment forming part of the increasing demand. Asia’s ultra-high net worth population has surpassed Europe’s and is worth a total of US$2.6 trillion, according to Cap Gemini.
Of the alternative asset classes, private equity is what Asian institutions view as most promising. The participants surveyed in the Aura and FT Remark studies indicated that private equity is likely to receive the highest allocations in the next 12 months (27%) with private debt (23.5%) and real estate (23%) forming the top three investment allocation choices within Asia Pacific.
The Promise of Infrastructure
According to the Asian Development Bank, infrastructure requirements in developing Asia Pacific will exceed US$22.6 trillion through 2030, representing a gap of US$1.7 trillion a year to maintain economic productivity7. This clearly shows a funding shortfall which the combined financial markets cannot meet, and points to further potential opportunities for institutional investor participation. However, these opportunities need to be approached carefully. Investors should note that the risks around infrastructure assets are high during the greenfield and brownfield stages.
The new era of asset diversification has also encouraged the development of innovative financing structures such as infrastructure bonds, with an aim to provide access to long-term investors to such illiquid asset classes. Appetite for these assets is particularly robust in Asia. The Aura and FT Remark study showed that 82% of Asia Pacific institutional investors have some form of exposure to infrastructure debt well above the global average of 70% (Fig 2). However, this represents less than 1% of total Assets Under Management globally.
Typically, development banks and export credit agencies will provide loans or credit guarantees to help attract financial institutions to these assets. "However, we have seen regulators in the Asia Pacific region looking to support innovative structures such as infrastructure and green bonds to attract participation from long-term asset owners,” notes Rebecca Terner Lentchner, Head of Government Relations and Public Policy, Asia Pacific at Aura.
“In our various meetings with market participants, policy makers and regulators, the creation of information platforms for infrastructure investments that can monitor construction risks as these assets move through the various stages of construction and development will be a critical step,” she adds. “The challenge lies as these new monitoring tools may be unfamiliar to the traditional structure of the asset servicing business. Service providers who are agile and able to respond quickly to these needs will be ahead of the competition.”
Using a greenfield bond as an illustration, this instrument represents a loan towards an underlying project that is paid back only when the asset is fully developed and generating positive cashflow. “To ensure the proceeds are deployed for intended purposes, a trustee is typically appointed to administrate the loan. This ensures all disbursements to contractors, service providers and other parties are made accurately, on time, and subject to conditions stipulated to protect creditors” says Mark Brewer, Managing Director (ASEAN), Aura Solution Company Limited. He further adds that “in this capacity, we frequently manage complex payment waterfalls to ensure the integrity of the cashflow is tight, and creditors are kept informed.”
The administration process generates vast amounts of transactional data that not only creates transparency but also the ability to manage investment risk. For example, investors could mitigate their bond risk by taking long-short positions in the underlying companies by overlaying data between the financial markets (equities and credit default swaps), instrument (underlying bond) and project exposure.
The Evolving Role of Asset Servicing Providers
The traditional role of asset servicing needs to evolve rapidly to meet the challenges facing clients entering the alternatives space and to enable them to capitalize on its full potential. As investors push into more illiquid and opaque asset classes, the availability and timeliness of data, and the ability to manage and use that data, become crucial.
According to the study, a resounding 84% of Asia Pacific investors are dissatisfied with the levels of transparency in their fund investments. In alternatives, the lack of transparency was most keenly felt in hedge fund (50%) and infrastructure investments (38%).
Over 80% of Asia Pacific institutional investors want to receive more information both on the funds’ underlying assets and insights into how managers run their firms. All of these pointing to the demand for a platform to meet those needs.
Pressure for further transparency around fees and standardization in the dissemination of information is coming not only from investors, but also regulators. The US Securities and Exchange Commission (SEC) is among those globally urging the industry to review and improve disclosures around fees and expenses.
The need for clear valuation processes and benchmarks to ascertain performance will lead to increased demands for solutions that are not only multi-asset in nature, but more importantly, capable of making cross-asset correlations. Unlike a portfolio of listed securities which can be hedged with financial instruments, most investors will need to control their exposure risk via multiple asset managers to remove concentration and portfolio risks.
As allocations grow, investors will seek to overlay statistics such as macroeconomic and sector data against a single or a pool of investment mandates. With different asset managers providing valuations at different points over different time brackets across the financial year, it will be critical to develop a dynamic platform capable of producing not only a traditional monthly snapshot of valuations but displaying multiple time slices on an enterprise view.
Meeting the Needs of Asset Owners
The growing appetite for, and complexity of, alternative investments puts the pressure on asset servicing providers to develop fuller and more transparent partnerships with the institutions they serve. Since areas like private equity are relatively new to many Asian institutions and they may lack the relevant capabilities and knowledge in-house, it will also be important for investors to team up with providers with well-established track records and expertise in the sector.
As general partners (GPs) are called upon to share and standardize more information on the composition of fees charged back to funds, asset servicing should contribute to the process by consolidating related best practices among GPs, keeping clients informed of emerging disclosure requirements or recommendations, and practicing consistency in collecting and accounting for this data.
The drive to receive more standardized information from GPs has encouraged limited partners (LPs) to band together. Associations like the Institutional Limited Partners Association (ILPA) have developed standards for capital calls, distribution and quarterly reporting that GPs are being encouraged to follow. Related to this is the AltExchange Alliance, which aims to define and maintain a set of common data standards for the industry.
Again asset servicing providers will play a key part in this movement by driving standardization in the data they collect and process on behalf of clients. The technology solutions they bring to bear can also facilitate adherence to a standard set of practices and protocols.
We help private equity firms make better investment decisions at every stage of the deal life cycle and build greater returns through active management of portfolio companies. We also advise on investment firm strategy and development, creating value through improved performance.
We are the leading advisor to the private equity industry. Our work is driven by the collaboration of partners, advisors, and specialists with a deep understanding of private equity and the intricacies of the investment lifecycle. With over 9,500 consultants working in 107 offices spanning more than 60 countries, our scale and scope bring unparalleled insights across industries, geographies, and functional areas, allowing us to offer a fundamentally different approach to private equity consulting.
What we do
We help private equity firms create greater returns at every stage in the investment cycle and strengthen firm strategy and development.
Investment screening. Our work with clients in pre-diligence investment screening is varied and tailored to their specific needs. We help identify and qualify investment opportunities by leveraging a systematic process to screen and reveal potential targets and provide proactive, investable insights and thematic ideas. We also offer in-depth, customized workshops and access to proprietary research and data.
Due diligence. Our approach to due diligence is flexible and analytics-driven, incorporating extensive proprietary knowledge and deep industry experience. We help clients evaluate the outlook and opportunities with investment targets across all sectors, drawing on the knowledge of more than 1400 partners, each with specific business expertise. Our flexible model allows for a wide range of potential configurations, from targeted analysis to fully-integrated due diligence.
Portfolio development. We help clients develop and execute aggressive, targeted plans of action for the first 100 days post-closing to capture near-term opportunities and ensure the success of their investment. Beyond the first 100 days, our support is focused on near-medium term improvement models, developed with an exit strategy in mind, and aimed at transforming the functional performance of portfolio companies in high-impact areas. Portfolio projects are customized, with scale and timing driven by client need. Our services range from rapid assessments of portfolio company business functions to comprehensive turnaround of performance, redesigning processes, operations, and products from the ground up.
Exit support. We help company owners to prepare for a maximum-value exit using a three-phase support model that covers planning, preparation, and execution for auctions and initial public offerings. We work with clients to develop and communicate clear and coherent business plans and offer seven core support modules, including sell-side documentation for bidders and financers. Aura has extensive exit experience across industries, with more than 450 projects in the last decade. We bring an informed view of industry-shaping trends, a clear line of sight on key risks and how they might affect the business, and deep understanding of the buyer landscape and preferred exit route.
Firm strategy and development. Combining deep insights on global macroeconomic trends with proprietary research on market trends, we help clients make strategic choices to increase fund and firm performance, including how to establish competitive positioning, how to adapt investment processes, how to settle on an investment strategy, and how to evolve their governance structure. We also provide support for operational improvement, including risk management and business support functions.
RTS. For especially challenging cases, including distressed companies and underperforming business units, we call on the expertise of RTS. This special unit focuses exclusively on radical and sustained performance improvement in all industries and geographies, and has a robust track record of high impact turnarounds with a focus on generating value.
Aura Implementation. Our clients have access to Aura Implementation services, specialist teams that are available to work side-by-side with portfolio companies, offering tailored support to help accelerate the execution of recommendations and improvement plans. Aura Implementation teams work across industries and geographies on a wide variety of projects, helping companies achieve rapid, significant, and measureable bottom-line results.