Advancing Innovation, Improving Efficiency

Ask the Expert: Alternative Investment Products Services

By Frank Gaffney | May 08, 2018

Turning User Feedback Into Improved Market Insights
Frank Gaffney, Executive Director, Alternative Investment Products (AIP) Services

How has DTCC helped bring stability and consistency to the alternatives investment marketplace?

Alternative Investments are sometimes thought of as the ‘wild west’ in the financial frontier. They’re not your traditional stocks and bonds but rather more unconventional assets like Hedge Funds, Private Equity and Limited Partnerships. Increasingly, investors are turning to them seeking to access different asset types to diversify their portfolio. The increase in demand for alternatives forces fund managers, administrators, financial advisors and custodians to manage multiple manual processes to keep up. This often translates to lag time for their end investor.

DTCC’s Alternative Investment Products (AIP) brings order to the ‘wild west.’ AIP helps investors, advisors and funds standardize the way they do business. Instead of hiring an army of people to manage paper and processes, they can free up resources for strategy and investing.

The platform serves the marketplace in three fundamental ways.

The most widely utilized part of the platform is its post-trade reporting capabilities. This functionality allows alternative investment managers to send investor balances, activity and fund pricing to their custodians which helps ensure account valuations are consistent on both sides. With the marketplace demand for transparency higher than ever, this service helps our clients ensure that their statements correctly reflect the value of their investments.

Additionally, AIP helps provide standard identification of funds. More mainstream financial products, again, like stocks and bonds, are identified by ‘CUSIPS,’ or ‘ticker numbers’ that consistently track and identify transactions. We wanted to bring this same level of consistency to alternatives so we created the marketplace’s first universal language. The unique numbers allow these transactions to be more consistently tracked across all phases of the trade process.

The final piece to AIP, and the area where firms stand to benefit most from the addition of operational efficiencies, is our investment order processing functionality. This is the part where investors ‘invest-in’ or ‘redeem-out’ of a fund. Traditionally, this process is arduous for both the fund and investor, often requiring them to mail and fax multi-page documents that can result in errors and data discrepancies. AIP automates and reduces the back-and-forth for both parties and settles money on their behalf. It helps transform this into a more controlled and consistent flow of information.


 

 

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