Investing in credit, bank debt, and structured financing products can provide a steady return on investment for hedge funds, but for many investors, accounting for these complex instruments proves to be the real challenge. The private debt market continues to see astronomical growth, with fundraising advancing by 10 percent in 2017, totaling more than $100 billion to invest in private debt, according to the McKinsey Global Private Market Review 2018[1]. Per McKinsey, there are many factors influencing the rise in private debt, including diversification, “deteriorating returns in their fixed-income investments,” and notably that some funds “see private debt as a less risky way to play PE—investors get a more favorable part of companies’ capital structure, and do not have to settle for substantially lower returns.” [1].
Accounting systems built to support traditional equity and fixed-income portfolios simply can’t handle many of the nuances of these asset classes. Therefore, firms often resort to spreadsheet workarounds, which are not only inefficient and time consuming, but also runs a high risk of errors. In particular, fund managers often lack visibility to see or manage all the outstanding loans in their portfolios.
Operational barriers shouldn’t stand in the way of opportunities in the credit markets. Fortunately, users of SS&C Advent’s Geneva platform can avoid this scenario with Geneva’s support of a full range of credit instruments, bank loans, and derivatives, including swaps. Its accounting engine can handle everything from transaction processing and settlement to accruals and income payments, as well as cash flow projections, valuations, amortization, and reporting.
Credit functionality is of growing interest and a high priority for our clients. Geneva allows for much easier user-designed workflows for processing all different types of credit positions clients hold and need to service, including:
- From one screen, users can easily initiate paydowns, rollovers, drawdowns, and add fees. On that same screen, they can process payment in kind (PIK), settle loans and manage and age interest delinquencies.
- A new Position workspace makes it easy to view all credit positions and drill down into details on all loan contracts, credit activity associated with any loan, trades, changes that impact principal, and more.
- A Transaction Workspace makes it easy to settle loans and complete the entire process within one screen.
- An Interest Management Workspace enables users to view delinquent interest receipts and reallocate interest should the borrower make a partial or full payment or a write-off. This features comes with a new financial accounts tool for accurately tracking the state of missed payments and aging them.
As investors continue to diversify their portfolios and expand into new asset classes, many rely on Geneva to streamline and automate the processing and administration of credit instruments and loans. Get the full details of Geneva’s credit processing capabilities and find out how you can avoid account headaches for good.
Source:
[1] McKinsey & Company. The rise and rise of private markets McKinsey Global Private Market Review 2018.
