Transforming a New York Hedge Fund's Middle- and Back-Office Through Outsourcing and Automation

• Time-Consuming Bank Reconciliation: Reconciling bank statements was a tedious and error-prone manual task. Staff spent countless hours combing through data, increasing the risk of inaccuracies and delays.
• Inefficient Portfolio Accounting: Portfolio accounting lacked automation, hindering the ability to generate timely and accurate performance reports.
• This limited the firm's ability to effectively monitor investment positions and make data-driven decisions.
• Manual Transaction Booking: Booking transactions through Generally Accepted Accounting Principles (GAAP) was a slow and laborious manual process. This delayed the generation of financial reports and posed compliance risks.
• Month-End Struggle: Creating the general ledger, trial balance, and reconciling the balance sheet at month-end was a significant undertaking involving extensive manual effort. This inefficiency hampered the firm's ability to close the books promptly.

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Recognizing the need for a more efficient and scalable solution, the hedge fund management firm made a strategic decision to outsource their investment operations to Empaxis, a middle- and back-office (MBO) service provider for hedge funds. This decision brought on board a dedicated Empaxis team with 20 years of experience in operations and data management.

Leveraging Empaxis’s resources and technology, the hedge fund’s back-office operations was transformed in the following ways:

• Automated Bank Reconciliation: Through a combination of Excel macro development and data integration with Advent Axys, Empaxis streamlined the bank reconciliation processes within the hedge fund's portfolio management system. Data was automatically pulled and matched, significantly reducing manual intervention and the potential for errors.
• Enhanced Portfolio Accounting: Empaxis implemented automation within the portfolio accounting system, ensuring timely and accurate performance measurement. This provided the hedge fund with critical insights into their investment positions and returns, empowering them to make informed investment decisions.
• Streamlined Transaction Booking: Transaction bookings were automated to adhere to GAAP methods. This not only improved efficiency but also enhanced the accuracy and timeliness of financial reporting, allowing the hedge fund to meet regulatory deadlines with confidence.
• Automated Month-End Closing: Empaxis developed automated workflows for generating the general ledger, trial balance, and reconciling the balance sheet at month-end. This significantly reduced manual work, streamlined the closing process, and freed up valuable staff time for more strategic tasks.

The outsourcing initiative, with the services from Empaxis, yielded a multitude of benefits for the hedge fund manager:

• Increased Efficiency: Automation significantly reduced the time spent on back-office tasks, freeing up internal resources to focus on core investment activities like portfolio management and client relationship building.
• Improved Accuracy: Automating processes minimized the risk of human error, leading to more reliable financial data. This enhanced investor confidence and strengthened the firm's overall financial health.
• Enhanced Reporting: Timely and accurate financial reporting allowed for better decision-making improved regulatory compliance, and facilitated smoother investor communication.
• Cost Savings: Outsourcing MBO, including general ledger accounting, provided a significant return on investment (ROI). The hedge fund reduced personnel costs associated with these tasks, allowing them to reinvest those resources into core business functions and growth initiatives.

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