Revolutionizing Alternative Asset Processing: A Look at Modern Solutions


As investments in alternative assets have grown over the years, the unscalable manual processes involved in administering this asset class have become unsustainable. Demand for faster and more efficient processing has driven technology to begin catching up.

So what solutions are out there in today’s landscape? Olmstead recently participated in several alternative investment capability reviews of middle office service providers, fund administrators, and technology vendors. Let’s review some of the most burdensome alternative investment processes and what today’s solutions entail.

Subscriptions, Redemptions, and Commitments

Making an investment in an alternative fund means filling out documentation which often requires dozens of data inputs. On top of that, maintaining current KYC/AML information is a logistical burden, particularly for firms managing alternative portfolios for many client investors. And keeping track of the status of your transactions is a whole other problem.

Many service providers now leverage tools to generate hedge fund subscription and private equity commitment templates. These templates are automatically populated from a client master to eliminate most of the manual data entry. For maintaining KYC/AML documentation, repositories track expiration dates, and notification occurs in advance of a document going stale. For oversight, dashboards are provided so the status of each transaction can be seen at any given time, and any issues causing a delay can quickly be addressed.

While there are still manual aspects to this process, these tools help mitigate the risk of manual errors, reduce delays, and provide transparency.

Data Collection

Investing in alternatives also means managing a sea of PDF files flowing in from each fund manager. Many service providers have implemented tools enabling data collection to be automated.

Documents arriving via email are automatically classified for handling. Shared portals used by the GP community are leveraged to directly extract information. For proprietary portals, some providers leverage document collection teams to manually source these documents. Others use bots and APIs to establish connectivity to the portals, pinging portals throughout the day to know when to auto-extract new documentation.

Some even provide their own portal for GPs to upload and submit their data electronically. Participating GPs can automatically generate the output from their system to submit data for the specific investors being requested.

Data Ingestion

Automated collection of statements is great, but then what? Good news: You no longer need to manually input the information from the PDF. Using flexible mapping and importing tools, documents in a variety of formats can be ingested automatically.

Once documents are collected, data is ingested using natural language processing and machine learning-based AI tools that digitize and extract the necessary information. This technology is used for document types ranging from capital call notices to valuation statements and beyond. The data is translated into a normalized data model. Service providers can then automatically load that data into their platforms for immediate use.

Automated data quality controls are applied to ingested data. And as artificial intelligence is still imperfect, a human verification process nearly always occurs post-ingestion as well.

Fund Look-Through

The most data-intensive part of the process comes with looking through to the underlying investments of your alternative funds. Managing asset class allocations, ESG guardrails, country, company, & issuer exposure, and other investment requirements mean that your investment teams must have a clear view into the funds within their portfolios.

Fortunately, there are vendors which can aggregate and supply the underlying asset data of alternative investments (including real estate), as well as for ETF, mutual fund, and other traditional fund investment data. Some vendors only source the data, while others both source and offer reporting & analytics solutions for that data.  

Using managed data services, underlying investment positions are mastered and flow directly to your OMS, providing a foundation for total portfolio look-through capabilities. These services can enable a controlled, multi-asset analysis across public and private markets within a single platform.

If you’re still managing your alternative asset processing in-house, reach out to us to learn more about industry solutions and how you can benefit from them.

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