Planet earth is going through an unprecedented calamity. The COVID-19 pandemic has spared no one. From a common man to the global economy - everything is in a state of negative disruption.
Business - whether it is local or global is now under tremendous pressure. Hedge funds operating from the US are also feeling the heat from every end. With big guns like Credit Suisse and Nomura have already started exiting from their positions in many US based hedge funds, the signs are pretty clear.
Adding to the prevailing situation is the news that "U.S. Treasury Secretary Janet Yellen is facing pressure from Democrats to revive tougher scrutiny of hedge funds and other large pools of capital as she heads her first meeting of the premier grouping of U.S. financial regulators on Wednesday." (source: Reuters)
The picture is crystal clear here - US based hedge funds and alternate funds are running their business in a very tough environment. However, they have a financial and business responsibility to keep them floated and shutting down operations is just not an option. It's time to take some proactive steps and adjust to the new normal.
A Tactical Solution
The time has come for the US based hedge and alternate funds to seek ways to keep their operational costs under control while not compromising on the quality of output. Hedge funds rely on investments and making sane investments during the times of crisis is a lot more complex and difficult. They need every expertise working for them. A probable solution to keeping things in a healthy state would be to outsource their backend operations to third party solution provider and optimise their cost efficiency.
As per a recent survey, 80% of European and US outsourcing firms ranked India as their number one outsourcing destination. The National Association of Software & Service Companies (NASSCOM) also reported that almost half of all Fortune 500 companies choose to outsource software development to Indian outsourcing firms. Even though other countries like China, Mexico, and the Philippines, have emerged as major competitors, India has managed to outmaneuver all others and emerge as the top outsourcing destination primarily due to its growing economy,unmatched talent pooland cost of labour being one of lowest across world.India adds around 3.1 million graduates workforce each year. India also holds the distinction of being the largest English speaking nation in the world, much larger even than USA.
Outsourcing hedge fund and alternate fund’s back end operations to India can prove to be highly beneficial for the entities operating out of the US.It's going to be a lot cheaper, hence providing better operational margins to the hedge fund company. Apart from the cost implications there are many other benefits of outsourcing the hedge fund backend operations to India.
India is a knowledge based economy, we have one of the biggest KPO sectors in the world. Businesses across the world trust Indian KPO and allied agencies for their backend processes.starting from a well qualified finance professional to a software developer to a data entry operator as well as CXO can be available.
2. Reduced Costs
US based funds can get the same quality and quantity of backend operations done with utmost efficiency at a fraction of cost. Here the added benefit of savings on employee insurance and state taxes and many other compliance modalities are also a big plus. you could expect as low as $15 an hour in place of normal $50 an hour in USA. So The third part service provider can really give you a very flexible pricing model to accommodate your needs.
3. Operational Efficiencies
India has the numbers and the expertise to keep the show running. We have one of the biggest populations of finance professionals who are well trained and constantly upgrade their skills. Depending upon need the manpower strength can be ramped up in no time while maintaining the quality at best. You might start an outsourcing plan only for cost saving but there is bright chance that you might stick to plan for better productivity, stability and sustainability.
4. Quality Manpower and shared services
One of the paradigm shift which has happened these days that the business leaders and chief executives either have taken furlong or have left their jobs for other pressing reasons due personal or professional reason. This gives us an immediate opportunity to engage them and utilise their capabilities and competencies at fractional cost.
Ideally the US based hedge funds can very safely outsource their backend operations like financial analysis, credit analysis, accounting, portfolio management, internal control checks and risk analysis to the Indian agencies. Apart from these there are agencies who can even take care of the entire financial operations and digital marketing. There are multiple agencies in India as well as few other parts of world, who takes care of these function but be sure to check the authenticity, competency, trust and control compliances like ISO and SOC for maintaining optimal corporate governance, risk management and control (GRC)
It's high time that US based hedge funds should start thinking in this direction as swift action is the key here. The sooner they take the leap - better would be their market position.
The 10-12-hour time difference at times is taken as deal breaker between India and the USA but this also provides companies with an unique opportunities for work to be completed earlier than expected, leading to efficiency, productivity and bandwidth to focus on more crucial works. The time difference can be an ideal option for clients who wish to outsource various service-related options, such as Customer Support, data modelling, business research, software development, helpdesk and other updating services
So as a concluding note I am of the opinion that you should outsource yournon-core business operations so that you can do what you do well.