When it comes to allocating expenses, a CFO’s top priority is compliance. With expense allocation policies evolving every year, firms can no longer rely on a process that has limited capabilities. Instead, they must turn to a solution that can make room for policy changes while reducing uncertainty and the risk of error.
Due to the complexity of expense rules differing from fund to fund, it is vital that firms build a model or select a system that can be configured to support new and evolving allocation methodologies. For example, if AUM was being used as the main allocation basis and it suddenly needs to be switched to committed capital, a good system should be flexible enough to adjust for the change rather quickly.
A firm may also face scenarios where a certain type of expense can no longer be allocated to funds or where funds are in liquidation and do not have enough cash to pay for the expenses allocated to them – forcing the management company to bear the charge. These again are cases where a flexible and configurable system will allow for changes on the fly.
Configurability and flexibility are core strengths of an expense management and allocation system that help support ever-changing expense allocation policies and provide managers with a peace of mind that their firm is compliant. IVP Expense Manager, built for private equity and hedge fund firms, streamlines allocations, codifying complex and fund-specific rules so users can follow them automatically. The solution also keeps a detailed audit trail of all actions for total transparency – giving asset managers the ability to improve accuracy and efficiency, reduce the risk of errors, and ensure full compliance.