Alternative Investments Document Processing

Alternative Investments refers to a category of investment types that are difficult and problematic to process for all types of firms that have responsibilities associated with them. The roles firms play relative to alternative investments differ, i.e. administrator, custodian, guarantor, etc. Consequently the data required by each firm is dependant on their particular role in the process. Asset types included in the category are Hedge Funds, Fund of Hedge Funds, Private Equity Funds, Variable Rate Annuities, Derivatives, REITS, Credit Default Swaps and several other investment types that lack the structure and regulation associated with more traditional investment types. It is this lack of structure and regulation that results in no reporting standards. This means that the various documents arrive with no consistency of format nor pre-defined structure. Consequently, each firm involved in any aspect of the process is required to devote human resources to the time consuming and tedious task of extracting the information necessary to meet their particular processing requirements. Recognos Financial has developed an application that handles the extraction process and allows valuable resources to focus on more important tasks.

Recognos Financial has developed an application that creates structured data from unstructured documents. While the application can be applied to any type of unstructured text document, for Alternative Investments it includes: Offering Statements/Prospectuses, Shareholder Reports, Subscriptions, etc, in short – all of the documents required to meet the specific functions of a particular firm based on their role in the process.

Currently the function is labor intensive with the overwhelming majority of time spent by the clerical staff in reading and extracting key data from the hundreds of reports and documents received on a regular basis from fund managers, administrators, and other sources. This extracted data is then keyed into spreadsheets or other applications that feed internal applications. The Alternative Investments application does most of the tedious work by performing the data extraction and automatically populating required applications with the appropriate data. In addition, errors are reduced through the elimination of the re-keying of data. A summary of the process is essentially as follows:

  • Receive e-mails, faxes and hardcopy documents from fund managers and/or administrators, etc. Hardcopy documents are scanned and merged with faxes – these documents are then processed via OCR and converted to text. E-mail attachments are stripped off and merged with the other document types.
  • The text documents are then processed through the Recognos Financial syntactically and semantically based parsing agents where the key data elements are extracted. The results are displayed interactively in conjunction with the original document. Any exceptions are identified and directed to a work queue where they are reviewed by the staff.
  • Resulting data is then available for review and export to both internal applications and a semantic data repository.

An average group of ten clerical staff can be reduced by as much as 70%. The remaining staff are focused on exceptions and the group functions that require a greater level of expertise. The resultant data can also be used as part of the firm’s counter party risk program as the holdings within a given fund are identified and a security master of these privately held firms is maintained. Supplementing that security master with data from external sources (i.e. D&B) provides a reasonable assessment of the stability of the firms in which the fund, and ultimately the client is invested.