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The central accounting system only has a limited ability to keep precise department-level records pertaining to grant administration, which causes many of the problems that department administrators encounter. In this situation, shadow accounting is important.
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What are the perks of shadow accounting for your firm? If you are thinking about establishing shadow accounting or expanding or reducing the scope of its present shadow accounting processes, it's crucial to consider the costs, advantages and customise your system to your risk profile. As per the recent surveys, while the vast majority of investors demand shadow accounting, just a small percentage are willing to pay for it. Maintaining proper management of account and project spending, account tracking, and other financial record-keeping is typically a challenge for grant managers, administrators, and other department staff. The central accounting system only has a limited ability to keep precise department-level records pertaining to grant administration, which causes many of the problems that department administrators encounter. In this situation, shadow accounting is important, the following are some of the advantages of shadow accounting: Due diligence demands If hedge funds want to obtain inflows in today's competitive fundraising environment, they must meet allocators' extremely strict operational due diligence standards. Allocation processes can take years, and there is a lot of competition. Because there are more money and tactics than ever before, businesses must stand out. However, before the chief investment officer or portfolio manager can explain the fund's unique selling proposition, or why their strategy is superior to that of their competitors, investors must have confidence that their money will be safe and properly accounted for. It's critical to start with the correct foundations in place. A fund can be denied if one checkbox on the due diligence report is left blank. Firms with a strong operational infrastructure, on the other hand, will be more appealing to institutional investors. Expectations for customer service Another factor to consider is the ability to give high-quality, responsive services to allocators in a more efficient manner. Institutional investors are increasingly looking for companies that can better minimise market and operational risks. A shadow accounting infrastructure provides supervision and transparency, allowing hedge funds to monitor, control, and decrease risk while also reducing their dependency on their fund administrator. Allocators' reporting requirements are also changing. They want more information, and they want it now. Many people are no longer willing to wait until the end of the month or perhaps the following month for a NAV pack. Shadowing enables businesses to satisfy these changing demands. Managers can prepare and submit reports without having to wait for their fund administrator's official books and records if they have the data they need. Improve the effectiveness of your fund Direct access to financial precise, real-time data from an Accounting Book of Record is a crucial foundation for a fund's whole infrastructure. Any internal decision-making tool, independent of function or end user, can then access data from a consolidated data source that is always up to date. The capacity to obtain organised and enriched holdings data and exposure reports, as well as slice and dice by strategy, improves the efficiency of management information dashboards, front-office tools, and risk management activities fed by this data. As a result, a fund's decision-making and capacity to convey its competitive advantage to allocators should increase. Flexibility and independence in operations Shadowing enables operational flexibility and independence, ensuring that businesses are not dependent on their third- party administrators. This provides them with vital mobility and is another important factor in reducing a fund's risk. Firms that rely on a third-party administrator have no means of knowing if the information they're getting is accurate. With mergers and acquisitions becoming more typical in the administration business, keeping a complete set of books and records guarantees that your company has a clean copy of mission-critical data regardless of M&A activity. Hedge funds need autonomy, and an accurate shadow accounting record offers them that. They can verify the information they receive and detect and correct any inaccuracies as soon as possible. Because the funds have complete access over their data.
