Institutional investors continue to demand consistent returns from their fund managers, but additionally, they are expecting operational excellence, across various middle- and back-office functions. This whitepaper examines some of the questions that institutional investors are (or should consider) asking their fund managers during operational due diligence processes around running an optimized treasury function.

Institutional Investors Raising the Bar

Asset allocators including pensions, endowments, foundations, and corporate CIOs have materially changed their approach to investing over the last decade. Topics rarely discussed prior to 2008 – concentration risk, counterparty exposure, the lack of fee transparency, borrow costs, margin requirements and many other topics – are now integral to investor due diligence and ongoing manager scrutiny.

Treasury operations, once relegated to the “back office”, now stands prominently on stage – first and foremost, protecting assets from a multitude of non-market risks and, secondarily and importantly, driving direct value to the bottom line.

With interest rates remaining at historically low levels, investors seeking strong risk-adjusted returns continue to increase their allocations to alternative investments. This trend is driving capital to hedge funds, private equity, and real estate asset classes. Interestingly, top-tier managers are beneficiaries of far more than their share of asset allocations – even on an AUM-adjusted basis, creating challenges for

smaller and mid-sized managers. Why?

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