Investment funds and their challenges
A new or emerging manager faces multiple challenges when setting off to raise an investment fund. Whether the manager is raising a PE fund, a venture fund or a hedge fund they all face similar hurdles including – sourcing and negotiating with investors, finding investment opportunities, creating fund documents, finding analysts to assist on the trading side, finding service providers…. the list can be daunting. Finding the right solution for the manager’s operational and financial program is another important decision. A good CFO/COO can provide impact and real value to an investment fund.
Hiring a CFO, a finance team, and the related systems support required to effectively run your finance department may require not only a significant investment of time and resources but also continuous efforts to retain the staff and maintain the systems. The costs involved include recruiting fees, high salaries, application fees, and many others. The hiring process can stretch over months, during which the investment firm’s core functions may suffer. CFOs on average leave after 3.5 years, which means even more recruiting fees being spent and a continuous cycle of hiring. Constant turnover in leadership can lead to instability that negatively impacts the fund’s overall performance and reputation.
The Evolution of Hiring an Outsourced Team
Fund managers were one of the last industries to realize you could outsource your CFO. Pre 2008, managers had been accustomed to a CFO running their finance function. Managers were accustomed to having one “throat to choke”, the CFO often sat in a pricey office across the hallway, beckoned over for the slightest issue. The financial reality of 2008 brought ingenuity as management realized a C-suite executive and their related function could be outsourced and managed instead by a talented team of individuals. Managers tested the waters and experienced the reliability of an outsourced provider with less of the overhead costs, less of the need for individual attention, less of the manager’s time. Once a manager chose an outsourced model, they rarely went back to the prior model.
Benefits to outsourcing the finance team
Outsourcing the finance team comes with numerous advantages that help investment firms overcome the challenges of building and maintaining in-house teams. By outsourcing the back office functions, investment firms can free their alternative asset managers from the daily minutiae of fund operations. This allows executives to focus more on their core competencies, such as investment strategy, deal sourcing, creating value for investors, and managing the firm’s growth trajectory.
Outsourcing finance functions can also contribute to cost savings. The operational expenses related to recruiting, training, and retaining in-house finance teams are much higher compared to the fees paid to outsourced providers. Replacing a CFO is an onerous and expensive task, involving potentially many hours of the investment executive’s time and a sizeable commission payment to executive recruiters. However, if an outsourced CFO decides to leave an outsourced firm, then the outsourced firm are incentivized to ensure that they have a “strong bench” that can continue to meet the client’s needs. Additionally, outsourcing providers often leverage sophisticated technology to deliver integrated data and analytics, enabling investment firms to make informed decisions and offer transparency to investors.
Finance as a Service with E78 Partners
E78 Partners can support investment firms by providing an outsourced finance team, or Finance as a Service, from the CFO down. Choosing E78 Partners as an outsourcing partner allows investment firms to access a ready team of experienced finance professionals who can handle the complexities of modern finance functions. This means the time-consuming and costly process of hiring an in-house team can be avoided, letting investment firms focus their efforts on their core strengths and growth.
Outsourcing your finance team to E78 Partners can save your investment firm valuable time and potentially hundreds of thousands of dollars each year. Our specialized team brings experience, expertise, and technology to the table, enabling you to optimize your investment firm’s performance without the cost and complexity of hiring and maintaining an in-house team. By leveraging our team, your firm can enhance its competitive edge in the industry and deliver better and more consistent returns for its investors.
Vince Calcagno
