CFO support services as a value creation lever

By Elise Gray, Head of CFO Support Services, and Dan Miller, Senior Managing Director, U.S.

The strategic edge: unlocking a competitive advantage for alternative funds with accounting support services.

In the rapidly evolving private funds sector, the role of the chief financial officer (CFO) has emerged as a pivotal figure at the intersection of financial skill and strategic foresight. This elevated role is increasingly vital in an environment where adaptability, insight and visionary leadership are key to navigating the complexities of the financial landscape.

As CFOs increasingly pivot to support client financials and investment strategy, their focus is being pulled from internal and fundamental business operations. Strategic leaders know, the garden that you water is the one that grows – a CFO splitting time between administrative responsibilities and larger firm objectives is bound to fail at one or both of those priorities.

The time pressure on CFOs is significantly amplified by current industry headwinds. According to a recent Bain & Co report, the high interest rate environment has led to a dramatic decline in deal value and count, with falls of 60% and 35% respectively from their 2021 peaks. This challenging landscape has highlighted the crucial role of CFOs in generating operating leverage and improving margins. The report notes that the current exit situation ‘shines a bright light on how critical the role of CFO is to generate operating leverage by improving margins.’

As asset managers grapple with these intensified pressures, CFOs are pivotal in enhancing returns by optimizing operational efficiency and strategic financial management. Their expertise is essential in navigating these complexities, turning these challenges into opportunities, and ensuring that resources are maximized to drive improved financial performance in an increasingly constrained environment.

Organizations are supporting CFOs by turning to experienced outsourced accounting and CFO support services teams to deliver on firm goals more efficiently. These firms can complement the work of an existing CFO or fill any gaps in the CFO office. They enable funds to instantly access the institutional infrastructure that satisfies investor expectations and expands market leverage.

In this guide, we’ll explore the key motivations driving alternative fund managers to use accounting and CFO support services.

Dynamic talent access and strategic alignment

The PwC Pulse Survey 2023 indicates that 51% of CFOs plan to hire in specific areas to drive growth. Most managers have a strong pipeline of talent for their investment function, but struggle when it comes to making back office hires. Finding accounting professionals who are day-one ready is difficult – building a cohesive team of experienced professionals with the right attitudes and expertise can take years.

Whether facing competing internal priorities or avoiding battling for talent, outsourced CFO services provide top-quality experts without the lead time or expense of hiring.

Custom solutions to enhance enterprise risk management

Managers are frequently caught unprepared when facing an institutional due diligence review, while the investment team is focused on putting their investment thesis forward – the process gets derailed by outdated or inadequate risk management protocols. Risk management practices are a strategic edge for managers, enabling them to navigate and capitalize on market opportunities while safeguarding their assets and stakeholders. We all know we need to have these policies in place, but the time and energy needed to design, implement, and then review on an ongoing basis as the business grows and changes is often deprioritized against more urgent deliverables.

Expert management of data reporting

Data is everything; the ability to harness and interpret financial data is a critical competitive advantage. Nearly half of all CFOs surveyed by McKinsey cite data fragmentation as their top hurdle and about one in two CFOs spends more time than necessary on data and reporting, and are still likely to leave key insights on the table.

Enhanced data management and analytics empower funds to make informed, strategic decisions swiftly, adapting to market changes and identifying opportunities with precision. But data is only as good as your data sanitation practices – the day-to-day work of inputting and reconciling information at the most granular level. Your outsourced CFO practitioners ensure your data is clear, accurate, and on-time, granting your firm an unobstructed view of crucial metrics.

Leveraging technological advancements for strategic benefit

The adoption of advanced technological solutions is a cornerstone of modern fund operations, enabling strategic differentiation and operational efficiency. This is especially critical as LLM tools become more institutional. Firms often hesitate to adopt new technology because of the up-front investment costs and concerns about implementation challenges – 88% of CFOs and other business executives say they struggle to capture value from their technology investments (PwC Pulse).

The strategic utilization of data platforms is a critical enabler for funds navigating increasingly stringent reporting requirements either from regulators or investors. To better monitor performance of portfolio companies, a strong data platform allows CFOs to curate, ingest, and present data from disparate sources, tailored to their unique needs, while ensuring security and compliance.

Firms can sidestep the challenge of having clean data and the wasted cost of faulty implementations by leveraging the technology of their OCFO provider. A report by BDO shows that the evolution of CFO to CVO (Chief Value Officer) will be enabled by technology. By embracing external CFO support, funds can integrate state-of-the-art technologies and a data platform that enhances financial operations, driving strategic analysis and fostering innovation. This technological integration positions funds at the forefront of industry advancements, enhancing their strategic posture and operational agility.

With in-depth experience in alternative funds and family offices, we can provide tailored expert services designed with your strategic goals and administrative requirements in mind.

Learn more about our CFO services.

About the authors

Elise is the Head of CFO Support Services, U.S. at IQ-EQ. In her six-year tenure, she has served as an outsourced CFO for 25+ asset managers ranging in AUM from $30m to $11bn across hedge funds, fund of funds, private equity and venture capital. She also leads the Regulatory Reporting Group that is responsible for the preparation and submission of Form PF and Annex IV filings for 500+ fund structures.

Dan is a Senior Managing Director for IQ-EQ, based in New York. With 15 years’ experience in the industry, Dan is an expert in designing next generation institutional grade trading architectures, hedge fund launch coordination, counterparty management, ensuring fund accounting best practices are adhered to, and building robust and repeatable operational processes for alternative investment advisors of all sizes.