Trader payouts are one of the most complicated aspects of the human resources (HR) functions at most alternative asset managers. Management is left to find a balance between rewarding their employees for superior performance in a given year, while encouraging loyalty and long tenures through the use of complex deferred compensation packages. In many cases a funds accounting department will take over many traditional HR functions due to the complex nature of the compensation agreements.

The accounting department of this fund needed to calculate and report the yearly bonus due to their traders and portfolio managers. The bonus was formula driven and determined by many complex factors. The inputs to the formula came from a variety of sources and were being collected manually in spreadsheets.

The client required a user friendly system that could automatically receive feeds directly from source systems and calculate the required accounting entries at month end. In addition, they required the system to produce the year end journal entries and compensation statements for the traders and portfolio managers.

FinServ provided a team of resources with unparalleled experience in fund compensation due to extensive prior experience with similar projects at many other funds. The FinServ team facilitated and documented detailed requirements sessions with key members of the firm to ensure that everything from the purchase of the hardware to the implementation of the application went as smoothly as possible.

Due to the sensitivity of the data, particular emphasis was placed on security and user access. FinServ utilized its Vendor Selection Methodology to assist the client in selecting a Corporate Performance Management application. Ultimately IBM’s TM1 product was selected based on its ability to satisfy the client’s most critical requirements.

FinServ resources customized TM1 to receive daily feeds from the client’s Front Office, General Ledger and reference data applications. The payout calculations were built into the system allowing for automated updates when the source data changed. Standard reports were produced providing a consistent view of the payout data to be presented to traders and senior management. In addition, the system was built to allow the client executives to change key metrics and perform detailed ‘What If’ analysis. This allowed the client the ability to forecast future payments based on a variety of scenarios.

After the successful integration of the TM1 product, the client drastically reduced the time needed to close its books each month. The system FinServ developed produces an automated extract that is loaded directly to the general ledger. The data is also available on a daily basis as compared to monthly analysis available previously.

In addition, the firm was able to add transparency and accuracy to a complex and highly sensitive process. By cross training multiple members of the client team on the new application the new process is no longer dependent on one individual; rather it can now be handled by multiple members of the accounting team. As a result of the implementation, the firm was able to retire 3 separate applications which resulted in reduced costs and maintenance. Under Finserv’s guidance the Fund has continued to leverage the TM1 system for other purposes including forecasting and allocations.