The Coronavirus has caused immense disruption to business throughout the financial services industry, both in The Bahamas and abroad. Some fund administrators, however, have taken it in their stride. This is the story of one business that benefited from early updates to its practices in ways that it could not envisage before the virus struck.
During the past two years of the COVID pandemic, all business operations have had to deal with change on a large scale. Even the world of fund administration has changed and, at Genesis Fund Services, these changes have affected not only what we do but also the way we do it.
Before the pandemic, we all tended to view change as inevitable. However, the general pace of change in our industry was moderate until COVID arrived. That pace then accelerated enormously and catapulted us into an uncertain future. Change occurred more quickly than we might have liked or expected, but undoubtedly it has been for the better.
We now seem to be emerging from the worst of the pandemic and entering a new era. This is a 'new normal' for clients, employees, fund investors, fund managers and for the jurisdiction. Technology, talent management and digitisation lie at the heart of this new normality.
The Paperless Office
At Genesis, we took the fortuitous decision in early 2018 to create a paperless office. We did not have a crystal ball to help us foresee the events of 2020/21, which included the sudden and unfortunate COVID-19 lock-down mandate. We did, however, see that digital technology was evolving and pushing our processes – and the industry as a whole – towards more digitisation. We had to satisfy the demands of our clients and fund investors (especially institutional investors) for more advanced technological reporting, communication and management of their business data.
Fund administration’s age-old reliance on manual processes and high volumes of paper was near death. Fortunately, before the pandemic struck, we reduced our paper processes and all remaining manual processes dramatically. COVID simply hastened and obliterated any vestiges of paper processes that were left because manual applications simply could not happen when everybody was working from home. The fund administration industry, and we here at Genesis, therefore adapted to the 'new normal' of paperless processing. We did this with subscriptions, redemptions, accounting and, most importantly, the review and collection of 'due diligence' data.
Without the advent of COVID, we would simply not have collected, vetted and processed 'due diligence' information from home as soon as we did. Before COVID, Genesis would never have permitted its employees, even its most capable and trusted employees, to have taken customers' passports, bank details and other information into their homes because of the need for privacy and accountability.
A Steep Learning Curve
However, to continue operations effectively and to satisfy regulatory responsibility while keeping up best practices, we had to work quickly to improve and monitor our cyber-security data-protection – fund administration’s newest cost centre. We had never anticipated a time when 100 per cent of the workforce had to work from home and the firm therefore had to take on the unbudgeted costs of buying everyone a new laptop, a second screen and an updated Wi-Fi device to speed up their work.
The advent of intense training in cyber-security and updates to controls that safeguard clients' information have led to major improvements and benefits at financial service providers. Now, employees who are not in the compliance department have to discharge responsibilities for 'due diligence' when they are at home and must be conscious of the need to safeguard clients’ information and mitigate the risks involved in that work. This they now do very well.
The use of two- and three-factor authentication has become the norm. Firms are far more aware of their duty to safeguard clients' data and have overwhelmingly improved the ways in which they mitigate risks that pertain to individuals during the pandemic. Videos, memos and virtual meetings regarding privacy and risk have increased tenfold...or at least, it feels like tenfold!
At Genesis, we have observed that COVID has made all staff more conscious of the risks that cyber-maladies pose. It has also made them realise that it is their regulatory – and laborious – duty to safeguard clients' data.
Balancing Between Work And Life
Many fund administration staff have worked arduously and conscientiously at home. Buckling under the stress of working all hours in a domestic setting, logging on in the middle of the night and answering emails at ungodly hours, they want to take some time off and not be overwhelmed by their new virtual world. In short, they need help and the senior management team has to make it available to them. Because of this, everyone's work/life balance has become a key issue at every meeting with the senior management team.
During the past two years, dreadful lockdowns, isolation and the need to work from home have changed the way in which so many of our colleagues view the work experience. Some of them have seen their parents and other family members succumb to the vicious disease or suffer grave illness from it. Many have changed careers and residency or moved to different firms in the same sector. Human capital has moved around in an unpredictable and somewhat disruptive way.
The retention of talent is also a top agenda item for the leaders of fund administrators. I remember, years ago, working outrageously long hours in fund administration – Sundays included. My employers expected this of me, but it is impossible for today's firms to expect the same; people will not come in on Sundays. Firms must now be more flexible and competitive. They must hold onto well-trained, experienced and talented people. They must, moreover, be able to attract and recruit talented professionals.
Despite having experienced some staff attrition, fund administrators have had many opportunities recently to hire eager, talented professionals from all over the globe and from career paths outside the world of financial services. When considering human resources, fund administrators no longer want to employ mechanically-minded people to perform robotic functions. They would rather invest in versatile, problem-solving individuals who can work with various aspects of the business.
Although the cost of recruiting, retraining and developing professionals has increased, firms have now fast-tracked these elements of the work experience and are using creative means to do so. When COVID disappears, the result at every firm will be a well-trained staff, a greater capacity for work and a better experience for clients.
During this period of COVID, fund administrators have been working hard to improve their technology. A few years ago, any one of them would have been served adequately by one system that handled accounting and its relationships with investors, one for corporate and compliance matters and perhaps another for other aspects of the business. However, although fees have gone down for services over the past 10 years, the cost of providing straight-through processing (STP) safely and efficiently has sky-rocketed along with the cost of both hardware and software.
Investment managers and investors in funds, moreover, have been insisting that their fund administrators ought to improve their reporting, data delivery and cyber-security continuously. Smaller fund administrators have found the piecemeal nature of their technological solutions burdensome. COVID has hastened their need for software connectivity, the better to improve results for clients. Technology is not only crucial for the provision of excellent service; it has become as essential as talented human capital. The need for fund administrators to provide collaborative business data through the use of technology has become standard. Their further collaboration with investment managers and fund administrators through the use of technology – with regards to both the safeguarding of clients' data and the provision of seamless services – is another part of the 'new normal.'
Investment managers have had to face similar burdensome movements in human resources and changes in technology and regulatory rules. As such, they have had to reassess their service providers to ensure that their talent, the quality of their services and the technology that they require have improved beyond pre-pandemic norms.
Over the decade prior to the pandemic, 'due diligence' questionnaires for fund administrators were standard. The pandemic, however, caused a noticeable increase in questions to do with technology and 'due diligence' which covered, among other things, data protection, redundancy and cyber-security. Investment managers and institutional investors have also intentionally asked more questions about corporate governance, diversity, equity and inclusion. It is now normal for fund administrators to provide dynamic governance, diversity and technological platforms.
Although technology and human capital are of prime concern for a good fund services organisation, it must have a good corporate culture that can knit the two together. An intentional drive to formulate and implement plans to ensure that we have a cohesive team has been crucial for us during COVID. The demand for talks and seminars on communication, mental health and mindfulness, or other subjects to do with the development of the whole person, has outweighed the demand for more accounting or compliance training by far. People want to work with people whom they like or admire, or with people who can help their careers.
The creation of a new 'conscientious culture' during and after COVID has become as important as the development of efficient accounting or 'due diligence' processes. At the same time, the maintenance and progression of a vibrant corporate culture has been one of the most difficult aspects of business in this pandemic. Collaboration among leaders and coaching in the workplace will continue to be an important aspect of the future work environment. All highly-functioning organisations have, or should have, continual plans to improve their corporate culture.
After the pandemic, The Bahamas will continue to be an important jurisdiction for investment funds. There is a high buzz about crypto-investing in our jurisdiction and the Government has recently issued a White Paper on the future of digital assets; it is evident that crypto-funds as an asset class represent the future. Globally, investment by institutional investors in the crypto-fund arena is relatively small but many fund managers are starting to consider some investment there, either directly in various crypto-currencies or through such other means as crypto-derivatives, crypto-firms or crypto-ETFs, i.e. exchange-traded funds.
The Bahamas’ regulated 'SMART' and 'Professional' fund classes are primed for the exploration of these new and exciting, but very real, structures. Investment managers or institutions that are trying to figure it out can use the SMART fund model to gain crypto-exposure. Bahamian Professional Funds have no limitation on types of assets and can also be used as vehicles for crypto-asset exposure.
Whether in crypto-funds, private equity funds or hedge funds, the 'new normal' has positioned Genesis to be even more capable of providing fund-administration services of high quality in the world after COVID than it was before. Our base in the Bahamas has helped us retain and recruit highly talented staff. It has also been crucial for the creation of our fast and reliable technological platform.
Antoine Bastian can be reached on +1 242 502 7020 or at email@example.com
Antoine W. Bastian currently serves as the Executive Chairman and CEO of Genesis Fund Services Limited, a licensed Investment Fund Administrator in the Bahamas and the CEO of GFS Financial Services LTD, an affiliate fund administrator in Singapore. Antoine Bastian earned his B.Sc. in Accounting from Indiana University in 1989. After university, Antoine joined Deloitte and Touché, Nassau Bahamas and subsequently qualified as a Certified Public Accountant. Shortly thereafter, Antoine was a mutual fund administrator with MeesPierson Fund Service and after that a manager at St. Matthew Investment Fund Accounting Limited... a Bahamian fund administrator that was associated with Michael J. Liccar & Co, based in Chicago, Illinois. Subsequent to this position, Antoine served on the Board of The Private Trust Corporation Limited and as Manager of its Mutual Fund Department, Genesis. In 2004, the department was relaunched as an independent entity, Genesis Fund Services Limited. Antoine also currently serves on numerous boards, inter alia, the Bahamas Financial Services Board, The Nassau Cruise Port Board, and the Yes Foundation. He also serves as the priest warden and a member of the vestry at the Church of the Most Holy Trinity.