From back office to center stage

The role of the private fund CFO has grown beyond all recognition, according to new research.

Ah, the 1990s. The good old days. Investors’ information demands were limited, private funds regulation was just a twinkle in the eyes of the Securities and Exchange Commission, and the few dedicated chief financial officers in this world were focused on number crunching. If only life were so simple now – almost two decades later private fund operations are almost unrecognizable.

pfm knew there were CFOs co-ordinating office moves, providing tech support to colleagues and even making sure the team has enough post-it notes and pens, but it wasn’t until we conducted a survey of US-based finance staff with Eisner Amper that we appreciated the scale of the operational shift, and the changed scope of the role of today’s CFO.

Headcount is growing, but so is the workload

Despite a huge increase in back office staff, many CFOs maintain that there is still a gap between resources and the volume of work at hand: “CFOs are being asked to do more with less,” one said. A second lamented: “The frustrating part is the lack of guidance provided in certain areas by the Securities and Exchange Commission.”

Regulatory compliance is a key factor in the increased amount of outsourcing from US managers. Traditionally the reserve of their European peers, a growing number are turning to external advisors to tackle issues, such as the requirements of the Foreign Account Tax Compliance Act. The increased threat of cyberattack – an issue that a number of CFOs say keeps them up at night – has also contributed to the growth in outsourcing. More than half of those surveyed said they had turned to an external information security expert for advice on specific tech issues over the past three years.

More demands from all sides

Of course, it’s not just the regulators demanding more from firms; investors too are scrutinizing their managers more closely. More than half of CFOs have been asked for more information from LPs in the past three years with US institutions being the most information-hungry of all, the survey found. And it’s not only the investment track record and limited partnership agreements they are poring over. They are increasingly interested in the back office itself.

Our survey also drills down into perceived familiarity with fund terms and conditions among LPs, fund managers and the back office, how integrated the administration and deals teams are, and how and why cybersecurity has become so central to the CFO role, despite many of them lacking the skills needed to tackle it. The full results – essential reading for all CFOs – can be found on www.privatefundscfo.com. We just hope they can find time to have a look.