Reconciliation is a conceptually simple but operationally complex problem to solve. At the end of each day, hedge fund managers reconcile trades, positions and cash balances across multiple counterparties, admins or custodians.
This typically takes place manually in spreadsheets or legacy reconciliation tools. Most funds today practice position reconciliation, bank reconciliation and cash reconciliation on a daily basis and month-end reconciliation against the admin for a clean NAV. NAV reconciliation occurs as per a fund’s NAV cut frequency. Other types include account reconciliation, trade reconciliation, bank statement reconciliation, transaction reconciliation, real-time reconciliation and swift reconciliation.
More so than ever before, managers need an advanced “any-to-any” data reconciliation tool that can reconcile multiple data sources like positions, cash, bank, trade, trial balance, P&L reconciliation, NAV, securities and inter-system reconciliation. It should have embedded end-to-end automated workflow management capabilities that tags and assigns exceptions automatically with a robust audit and multilevel sign-off approval workflow.
Competitive advantages of an efficient reconciliation are as follows:
- Automated exception-based mechanism to reduce time
- Enhanced visibility into service delivery of counterparties
- Intelligent insights generated by the system can support the counterparty interactions regarding the quality of service
- Reconciling data across portfolios, counterparties and a range of asset classes
- Sophisticated workflow mechanisms to assigned breaks can enhance each block of the workflow puzzle in order to achieve maximum efficiency
- Dynamic and user-friendly dashboard for a clear picture of available cash with the firm to enable the front office to make effective decisions on time
- Smoother compliance reporting mechanism with on-demand visibility and status tracking on reconciliations in the form of consolidated reports for both investors and regulators
- Access to information on-the-go as sophisticated mobile applications and client reporting has become one of the essential pillars of a superior customer experience in the asset management industry
Hedge fund functions and cross-functional gains from efficient reconciliation