The buy-side burden: Capturing every document, everywhere, all at once

It’s a manual process with huge implications for getting something wrong: ensuring that institutional investors, pension funds, and other buyside firms don’t miss important documents issued by the funds they invest in.  

These documents, including quarterly reports, fund distribution notices, and capital account statements, among others, may be distributed via third-party investor portals—each with different login credentials—or as email attachments, and firms can’t afford to not be paying attention.

“It’s a big task,” says a finance and operations executive at a European fund of funds. “We invest in many funds that report to us—some quarterly, some monthly, and others that issue some reports quarterly and others every six months.”
Funds may also change the timing and frequency of reports unexpectedly, the executive adds.

“The documents collected in this way can be very important—such as capital calls that have to be processed at short notice,” the executive says. Missing an important notice and misvaluing a fund or missing a capital call that requires transfer of money could leave a firm in violation of regulatory procedures, or could result in “quite material” losses, they add.

Generally, funds distribute the notices by portals operated by vendors. According to a market analysis by Accelex, a London-based content extraction technology provider that specializes in extracting data from PDF documents for private markets investments, more than one-third of documents are handled by FIS Digital Data Exchange and SS&C Intralinks (with 19% and 17% market shares, respectively), while eFront (with 9% market share) brings that total to 45%. Another 28% of documents are sent by email, and 10% via proprietary portals operated by the general partners that manage the funds. The remainder is accounted for by other, smaller investor portal operators.

Raj Contractor, lead business analyst at Accelex, says that most of these documents come from five or six platforms, but the big issue is that there’s a long tail of smaller portals involved in the process.

“For example, one client tells us that they use 72 investor portals, corresponding to 200 accounts,” he says. “On average, clients need to log into each portal twice per day. So, for large investors, that amounts to several full-time employees’ [who have to take the] time to check for and download documents from these portals.” These could be back-office, accounting, or portfolio monitoring staff with other duties.

Each of these different portals may serve different funds, and have different security requirements, each with their own login credentials and multifactor authentication. That’s a lot of manual work, the finance and operations executive says.
In response, Accelex recently began offering a new service that connects to the APIs of those portals that have one available to automatically query for and download new documents. It also categorizes the documents in a standard terminology, since different investor portals may categorize the same document differently, and recognizes different naming conventions referring to the same fund.

The vendor chose to leverage APIs rather than RPA (robotic process automation) because APIs support programmatic access that can query portals more frequently— though using an API attracts fees—whereas RPA basically creates a bot that mimics the human interaction, and may not be able to adapt for, or account for, changes to a portal that might cause them to miss a document or download duplicates.

Some portals already have APIs that Accelex can use, Contractor says. Smaller portals that don’t currently offer an API may be able to build one—“It’s not a huge technical challenge,” he says—or the vendor could use RPA as a fallback position for those portals.

Automating the process isn’t just about managing the burden of dozens of accounts, investor portals and documents: for smaller firms with fewer requirements, it also provides the security of knowing that it will identify any unexpected documents.
“Smaller clients may only receive four or five documents per week; so it’s not always about the volume— often, it’s about knowing when they might receive them. But with bigger clients, we see 60 or 70 documents per week,” Contractor says.  

And that’s just for funds that they invest in, not the entire universe of potential funds. Because there’s another potential future use case for this service that would involve monitoring and downloading all documents from every fund—for the purpose of performing due diligence on potential investments by monitoring their disclosures to assess the performance of funds.

Contractor says the vendor doesn’t currently support that use case, but is aware of its potential use, and that it would involve monitoring and downloading all available documents—not just those that firms are already invested in.

The fund of funds where the finance and operations executive works is already a client of Accelex’s core data extraction engine and is now setting up the required interfaces as part of a plan to use the new Accelex service to automate its document acquisition process. The reason? The finance and operations executive believes it can reduce manual effort, minimize operating errors, and produce better data quality.

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By Max Bowie, first published in Waters Technology