BNY Mellon’s Pershing Unit Releases White Paper Detailing Best Practices for Hedge Fund Outsourcing Solutions
Hedge Fund Law Report
As the global economy struggles to find stability in today’s volatile marketplace, the hedge fund industry faces new challenges after years of unprecedented growth. According to the white paper, “Fueling Growth: Outsourcing Solutions for Hedge Funds,” published by Pershing LLC, a BNY Mellon company, and Aite Group LLC, this growth has created an entire industry of service providers dedicated to fulfilling hedge funds’ “outsourcing” needs. The industry includes service providers such as prime brokers, fund administrators and information technology companies. However, at the same time, the recent increase in client redemption requests has threatened the viability of even the most well-managed hedge funds. As a result, while hedge funds struggle to recover from heavy losses and fund managers reassess their overall investment strategies, the white paper predicts that the need for outsourcing support may increase within the hedge fund community. In response, the white paper provides managers with a list of best practices for outsourcing and a systematic framework for helping them select and manage relationships effectively with third-party outsourcing solution providers. This article summarizes the findings of the white paper, including the many factors hedge funds should consider when establishing an outsourced vendor relationship, such as cost, evaluating disparate information, balancing internal resources, prioritizing short and long-term business goals and establishing appropriate relationship metrics.