The rise of multi-managers is a trend that cannot be overlooked. According to HedgeWeek’s September edition report on the Multi-Manager industry, the ability to outsource business processes has emerged as the most popular factor among General Partners (GPs) for generating Alpha. This shift is reshaping the investment landscape, offering new opportunities for allocators and the Multi-Manager platforms.
Key Findings: Outsourcing as a Catalyst for Alpha
The HedgeWeek report highlights that multi-managers are increasingly leveraging outsourcing to streamline operations and enhance performance. This trend is driven by several key factors:
Efficiency and Focus: By outsourcing non-core business processes, multi-managers can focus on their primary objective—investment management. This allows for more efficient allocation of resources and sharper investment strategies.
Access to Expertise: Legal Process Outsourcing (LPO) provides access to specialized expertise that might not be available in-house.
Cost Management: LPO can be a cost-effective solution, reducing overheads and operational costs.
Navigating the Complexities
Here are some considerations for stakeholders:
Regulatory Compliance: Ensuring compliance with local and international regulations.
Contractual Clarity: Clear and comprehensive contracts are essential to define the scope of transaction program services and manage expectations. This includes outlining performance metrics, dispute resolution mechanisms, as well as customary language.
Legal Risk Management: Identifying and mitigating risks for the Multi-Manager in the transactional structure.
LPO&Law’s Role
At LPO&Law, we work with investment fund and Special Purpose Vehicle (SPV) contracts and structures, advising US family offices, both domestically and in the overseas real estate market. In a securitization context on the other hand, transaction programs involving the SPV/issuer, underlying originator, management company, agents and not least, investors. As strategies and pods expand, additional capacity is required at the central level. Specifically, we can help to review documents related to the transaction structure, such as investment guidelines and circulars, Bylaws, service agreements, and trust deeds as well as ensuring compliance under applicable jurisdictions.
Conclusion
The rise of multi-managers and their ability to deliver risk adjusted returns is a trend to follow in the market. It offers numerous benefits, including enhanced efficiency, access to expertise, and cost management for allocators, family offices and FIs. However, it also presents legal and regulatory challenges that must be carefully managed from an operational perspective. Legal Outsourcing on project or ongoing basis frees up time while accessing senior expertise.
As the industry continues to evolve, we will assist both Multi-Managers as operators, and investors as their clients, to create value while ensuring compliance and mitigating risks.
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