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Ultimus Fund Solutions is a leading provider of full-service fund administration, accounting, middle office, and investor solutions to support the servicing of mutual funds, ETFs, retail alternative funds such as tender offer and interval funds, private funds, and public plans. Their deep commitment to excellence is evident in their investments in best-in-class technology, compliance programs, organization-wide cyber security efforts, and team of seasoned professionals.
Boutique service levels have always been a critical aspect of Ultimus’ value proposition to their asset management clients. So, when their clients began asking for additional daily oversight and the capabilities of an independent NAV contingency system to mitigate possible risks, Ultimus made it their mission to find a partner who could enhance their fund administration service offering with a tech-enhanced solution for shadow NAV monitoring.
After a careful review process, Ultimus chose FundGuard’s cloud-native, AI-powered, ultra-low-touch Contingent NAV solution, which offers:
Contingent NAVs are the most comprehensive solution to NAV resiliency, as they rely on the deployment of a second mutual fund accounting system that is separate and distinct from the primary ABOR and can be operated by the primary fund accounting service provider, the fund sponsor, or another third-party service provider. This approach requires the daily processing of all executed security trades with full income and amortization accrual accounting, corporate actions, daily pricing, profit and loss reporting, and an integrated general ledger to produce financial reports to fully support the contingent NAV.
It was imperative to Ultimus that they find a contingent NAV solution that could offer a very low-touch operating environment to eliminate any “double work” by their asset servicing team and/or their clients.
They initially looked at existing indicative net asset value (iNAV) solutions which measure the intraday NAV of an investment, but none could offer a true contingent NAV that could be relied upon in the case of extended outages.
When utilizing this service, Ultimus operates a nearly no-touch contingent NAV operating model with a seamless daily exceptions review process that requires very little day to day intervention.
FundGuard data inputs are not reliant on any primary system data, and the platform enables Ultimus to maintain a full set of data quality controls within the FundGuard platform that can be switched on at any point that FundGuard must assume a primary accounting role.
When invoked as a contingency, FundGuard finishes the day by reconciling its outputs to the primary system’s final outputs, enabling a seamless return when the primary system is back to being fully operational.
In a recent “drill” conducted between Ultimus and their client, Diamond Hill, they tested what it would be like to invoke the FundGuard contingent NAV in a live situation.
Diamond Hill chose a day in the middle of the week within normal processing hours to “bifurcate” and run through the calculations in real time (not after hours). Diamond Hill compared 30 NAVs, looking at the difference between FundGuard and their actual NAVs.
The result, according to Gary Young, Chief Compliance and Risk Officer at Diamond Hill Capital Management: 28 of 30 were exactly the same and the other two were only off by one penny per share due to rounding – a result of minor data differences. “This was extremely good and accurate in my opinion,” noted Young.
Remarking on the reliability and efficiency of the solution, Brian Lutes, Senior Vice President, Fund Accounting commented, “We’re extremely happy with the accuracy of FundGuard’s NAV calculations and the limited daily interaction from our fund accounting teams.”
The investment industry is at a critical crossroad. From climate change and ESG considerations to geopolitical events and cybersecurity, FundGuard believes that unless operational risk is viewed from a systemic and preventative point of view, investor protection will be little more than a band-aid. The industry has a responsibility to ensure that wealth is both sustainable and future-ready by addressing risk at its foundation. Ultimus has long understood this mission and continues to offer innovative technology solutions in service options to their asset managers, who want to build resiliency into their operating models.
Ultimus’ selection of FundGuard is indicative of this innovation. As both FundGuard and Ultimus are proving, asset managers or their fund administrators have an option when it comes to NAV contingency solutions, one that takes into consideration accuracy, outage duration, and affordability.
FundGuard’s investment accounting platform is a true cloud-native, reliable, AI-powered operating system. FundGuard is one application – one code line and one data model, offered with three out-of-the-box configurations to address three primary use cases: Contingency NAV (C-NAV), Accounting Books (ABOR) and Investment Books (IBOR).
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