Optimizing Cost Recovery for a Global Investment Firm
Case Studies
We are proud to announce the successful go-live of a project with a leading global investment firm, marking a significant milestone in enhancing their cost recovery and employee time certification processes.
What is Cost Recovery?
Cost recovery is how asset managers allocate internal expenses to the funds they manage, allowing for recouping costs associated with fund management and maintaining accountability to clients. This mechanism can include both direct costs linked to specific funds and indirect costs that support broader organizational functions. The objective is to ensure the firm’s financial sustainability while delivering value to investors.
The Role of EPM Solutions in Cost Recovery and SEC Compliance
Cost Recovery EPM solutions are built to centralize financial data, providing a single source of truth that enhances auditability and allows for transparent tracking of all costs associated with fund management. This centralization not only improves oversight but also ensures that firms can easily produce accurate reports required by regulatory bodies. Enhanced controls within the EPM framework help ensure compliance with the Securities and Exchange Commission (SEC) regulations, which mandate that private fund advisers disclose detailed fees and expenses to investors.
The SEC has established rules designed to increase transparency and protect investors, including requirements for quarterly reporting that detail fees, expenses, and fund performance. Under these rules, advisers must conduct annual audits of each private fund they manage. EPM solutions can facilitate this process by automating reporting mechanisms, ensuring that all requisite information is readily available, accurate, and consistent.
Additionally, advisers must disclose the total dollar amount of fees and provide sufficient information to help investors understand the nature of these costs. EPM solutions support this transparency by incorporating detailed tracking of all fee-related data and automating the generation of disclosures that navigate the complexities of compliance with SEC rules.
Key compliance points also include the prohibition against providing preferential treatment to certain investors, which could adversely impact others, along with the need to disclose any potential conflicts of interest. By implementing an EPM solution, firms can establish governance structures to manage these requirements effectively, ensuring that compliance processes are robust and comprehensive.
Despite a recent ruling by a U.S. Court of Appeals in June 2024 that vacated the SEC’s jurisdiction over some of these rules, indicating ongoing regulatory uncertainties, the proactive approach facilitated by an EPM solution allows firms to remain agile. They can adapt to evolving compliance requirements and continue to enhance their cost recovery frameworks, ultimately supporting both governance and investor trust.
Client Overview
The client is a global investment firm specializing in private equity, real assets, and credit. The firm operates in over 30 countries and manages a diverse portfolio across key sectors, including technology, healthcare, energy, and financial services. With a strong focus on leveraging technology to improve efficiency and controls, the client sought to enhance its internal cost recovery processes, streamline cost allocation frameworks, and position itself for future growth.
Project Highlights
In the early stages of the project, the team faced significant challenges around auditability, controls, workflow efficiency, and the scalability required to accommodate evolving business needs. A robust Enterprise Performance Management (EPM) solution played a crucial role in addressing these issues by establishing a well-structured framework for cost recovery processes.
- Enhanced Cost Recovery and Fund Allocation Process
- Streamlined Workflows : Replaced manual, Excel-based allocation processes with a centralized Anaplan solution, integrating data from key teams and sources to improve efficiency and accuracy.
- Dynamic Calculations : Developed a calculation engine to aggregate time certification data, establish overhead rates, and allocate fund recoverable costs based on the client’s unique rules, including exclusions, weights, and caps.
- Real-Time Reporting : Configured calculation tables to ensure accurate fund allocations, with real-time reporting capabilities for better oversight.
- Modernized Time Certification Workflow
- User-Friendly Design : Created an intuitive workflow for quarterly time certification submissions, equipped with templates capturing detailed time breakdowns by function and task.
- Enhanced Approvals : Migrated the approval process to Anaplan’s new workflow tool, enabling smoother approvals and a Workflow Dashboard for real-time monitoring.
- Improved Controls : Integrated checks to ensure all time is accounted for, reducing errors and enhancing compliance.
Value Delivered
- Efficiency Gains : Streamlining workflows reduced time spent on manual tasks, allowing employees to focus on strategic priorities.
- Improved Accuracy : Centralized data reduced risks associated with manual errors and ensured reliable, consistent reporting.
- Enhanced Analytics : Real-time access to data empowered teams with advanced reporting capabilities for better decision-making.
- Scalability : The solution was designed to adapt to the client’s growing needs, integrating additional teams and processes as required.
- Streamlined Compliance : Standardized templates and automated workflows strengthened governance and regulatory adherence.
- Increased Agility : Real-time data and flexible processes enabled faster responses to regulatory and market changes, as well as operational needs.
Conclusion
This project demonstrates the transformative power of advanced EPM technology, enhancing efficiency and supporting strategic goals. Our solutions not only optimize cost recovery and time certification but also set the stage for the client’s long-term success.
Acknowledgements
This success is a testament to the collaborative efforts and dedication of our exceptional project team:
- Project Exec/Solution Owner: Antonia Demmers
- Solution Architect/SME: Dan Hubner, Marc Xiao
- Model Builders: Dan Dunleavy, Hannah Shan
- Project Manager: Virgil Howard