Sramana Mitra: So the fund managers actually make the investment decisions and all the fundamental work, but the administrative work is handled by these global service providers, and you provide these service providers with their data management needs.
SS: That is exactly right. There are large self-administrators – very large asset managers who choose to do this internally. We provide those services as well. We try to cover the entire market by servicing asset managers directly and regional third-party administrators – you can consider those as a small version of a global service provider.
SM: This tells me you have some perspective of what is happening in the regulatory world. We have gone through a very disappointing financial crisis, which caused a lot of regulatory changes. In the thought process, there is a lot more cautious handling of insider trading and other activities. What are you seeing in terms of trends in the regulatory process of fund management?
SS: What we are seeing are increased regulation and increased transparency. All regulatory bodies are looking to get more information on what types of investments these fund managers are making – are they treating all investors fairly? We are seeing much more scrutiny around that. We are seeing that dollars that were typically put into traditional funds – by traditional funds I mean things like usage over in Europe, or mutual funds in the U.S.
We have seen people invest in these instruments, and they were expecting a highly regulated environment. Investments then have moved down into the alternative investment space like hedge funds here in the U.S. We have seen that regulatory [impetus] follow the money. That is making these mini hedge funds and alternative investment shops that didn’t have to have very strict regulatory compliance operations now having to put them in place. That is becoming a real challenge for them to deal with.
In the U.S., we have the advantage of having one regulatory body. But over in Europe, we are seeing that countries are adopting slightly different versions of those regulations and slightly different reporting requirements. For these global service providers that distribute funds globally, it is a real challenge to be able to manage all this disparate data. That is where we see the reliance on a regulatory platform being so critical. I think you can see why driving something like that into the cloud is even more valuable.
SM: You basically manage rule engines around the different regulatory requirements of the different countries, and you are able to customize reports based on those engines on behalf of your clients.
SS: That is a fair way to categorize it. There is also the part of automating the production of the reports. Unfortunately, many of these reports are filed with paper copies. They are not filed electronically as you might expect. The production of the actual report is thus also a challenge.
Then there is the management of the workflow process, because these reports are often viewed as marketing documents by these fund managers. Therefore, our task becomes even more challenging. Our system does data management, collection and aggregation of data, managing the rules to assemble the right information into the right reports, and then the creation of electronic filing capabilities.
I would also add that we view the future of this is near real-time regulatory reporting will go much more real-time in the future. I can see a place where maybe the SEC [Securities and Exchange Commission] has a view into these regulatory reporting platforms that are housed in the cloud but that support information from these global service providers so we can have this near real-time view of regulatory compliance.