Our Fully Integrated Administration System: PFS-Paxus

In June 2000, Custom House started transferring all of the funds under administration off their old system onto the new, fully integrated, automatic administration system - PFS PAXUS. This involved implementing the system with over 140 funds, which was a major task, as it meant that, over a period of time, Custom House was running both the original system and the new system in parallel, while administering fund clients.

Custom House completed the implementation in 2002, since when PFS PAXUS has increased its efficiency and reduced its turnaround time for administration delivery.

A fuller detailed description of the system follows hereunder.

The PFS-PAXUS product is a specialist accounting and administration application system for the alternative fund administration industry.  Because of its extensive functionality it is also used by administrators of conventional funds and those who desire to support both alternative and conventional funds.

PFS-PAUXS is prorevolutionary in that it integrates into one system all the processes that are normally performed on multiple systems.  These include the securities portfolio, allocation system, general ledger, fee calculation and share registry module.  Benefits of this approach include increased efficiency, reduced risk of error, faster valuations, ability to support complex structures and reducted IT costs.  PFS-PAXUS also brings all the benefits of a state of the art relational database design such as robustness, scalability and ease of extraction of data from the database.

Key Facts

• Since establishment in 1999, PFS-PAXUS has been utilised by a selection of the world's leading fund administrators and their hedge fund account needs.
• Global representation, with over 45 sites operating in over 16 countries.
• Critical Mass with over USD300b AUM being managed on the platform, PFS-PAXUS is in a position of strength.
• Continuous improvement, with 2 major releases every year and on demand ad-hoc enhancements, PFS-PAXUS can move fast to meet client specific nuances and industry trends as they emerge.
• PFS-PAXUS has been designed and is supported by experienced fund accountants from a business perspective.

Key Features

• All components of the system are integrated with the multi-currency General Ledger and NAV accounting.  PFS-PAXUS was designed from the start as an integrated fund accounting system.  Most users use the entire system, however it is possible to license individual modules.
• Portfolio module includes accounting for a wide range of securities products.  PFS-PAXUS contains market leading features for fund of funds accounting.  A portfolio reconciliation module is provided.
• Uploads - all major transactional data can be uploaded from Microsoft Excel files or text files - e.g. portfolio transactions, journal entries, share registry transactions, FX transactions.  API's are also provided.
• Security pricing and mark-to-market is performed via an interface with 2 major price source vendors.
• A functionally rich Shareholder Registry module supports the complex structures that exist in the alternatives industry, such as multi-series structures, equalisation and limited partnerships.
• Performance fees functionality has been designed for the alternatives fund industry, including High Water Marks, Equalisation, Hurdles, Series Consolidations/Roll-up.
• Powerful allocation functionality is provided as standard, including true Multi-currency series/class accounting with the ability to define the currency of each share series/class within the same accounting legal entity, industry standard performance fee equalisation model, extensive site configurable security system that controls user access privileges including fund restrictions, menu restrictions, optional marker/authoriser (4 eyes principal).
• Fund fees calculated automatically by PFS-PAXUS include management, administration, performance/incentive and other types of periodic accrual.
• PFS-PAXUS supports master/feeder structures and FX hedging.  PFS-PAXUS can revalue all tiers of fund-of-fund and master feeder structures in one process.
• All transactions and most standing data can be imported into PFS-PAXUS from Microsoft Excel worksheets.
• Shareholder contract notes and statements are customised for each investment manager with a tailored reporting tool.
• Additional modules included in the package include Anti-Money Laundering and Corporate Secretarial/Reporting.
• Web-reporting is available via an automated hand off to a widely used industry web-reporting provider.

Securities Module

Direct Security Investment | Both long and short equity and fixed income securities are supported.  The system generates and posts accounting entries to the general ledger for realised gain/loss, unrealised gain/loss, interest accruals, commission and other charges.

Corporate Actions | PFS-PAXUS supports automated accounting for stock splits (including correct accounting under FIFO), Dividends, Fixed Income coupons and maturities, Capital Adjustments and Schemes of arrangments.

Fund of Fund Strategies | PFS-PAXUS supports fund-of-fund portfolio accounting and master/feeder structures.  There are many fund of funds specific design features, such as the ability of entered trades to automatically adjust based on changing underlying NAV prices, split/deferred payouts from portfolio fund investments (e.g. 90%/10% deferred payouts) and storage of redemption terms.  Advanced fund of funds liquidity analysis reports that take into account redemptions terms are available.

Derivative Instruments | The securities module allows for the booking of contractts for difference (CFDs), futures and options.  The mark-to-market revaluation of derivatives is supported by PFS-PAXUS, but the pricing must come from an external source.

Foreign Exchange | Spot and forward foreign exchange are supported on PFS-PAXUS.

Fund Level Accounting Options | These include choice of trade date or settlement date accounting, FX bifurcation and commission treatment (expense or capitalise). 

Fund Level Inventory Methods | FIFO, average cost, lowest tax, LIFO and specified matching inventory methods are configurable at a fund level.

Flexible Revaluation Parameters| Revaluation of securities can be run daily, weekly, monthly or any other frequency specified by the user.  All accounting entries will be automatically adjusted and will flow through into a revised NAV and financial statements.

Prime-Broker and Transaction Uploads | Securities masters, transactions and prives may be uploaded directly from Excel or text files.  Trade files from 10 major Prime Brokers may be imported.

Price Feeds | PFS-PAXUS has the ability to import securities market prices and foreign exchange rates automatically (subject to price vendor license) from 2 major price providers or Excel.  PFS-PAXUS has the ability to store up to 7 security identifiers which are required by the pricing providers and also when uploading trades/prices.  In addition, PFS-PAXUs has a scheduling feature whereby the price feed can be scheduled to run at certain times.  For example, prices could be automatically imported in the early hours of the morning so that all prices are updated before employees arrive at work.

Side Pocket Support | PFS-PAXUS supports side pockets in many ways, one of which is the ability to linnk a portfolio transaction to a group of partners/classes/share series.  Having an integrated portfolio/allocation/general ledger/share registry system simplifies the side pocket process for such transactions and allows for a high degree of automation.

Orders | Users can enter a trade as an order.  Orders do not become part of the accounting until a user flags them as an accounting trade.  This is particularly useful for fund of funds situations where the transaction confirmation may take some time.

Reconciliation | A Portfolio reconciliation tool is provided to automate reconciliation of system securities positions with outside sources such as Prime Brokers and Custodians.

Push Button Valuations | Standard multi-series or equalisation funds can be valued automatically by running the valuation process without the need for manual adjustments.  Valuations can be, for fund-of-funds or master feeder groups or all funds together in one process.  If underlying shares or portfolio valuation changes, the fees and valuation can be recalculated at the push of a button.  This is particularly useful for "fund of funds" where estimated values of underlying funds often change, requiring recalculation of fees and unit pricing.

Point In Time Valuations | PFS-PAXUS's flexible general ledger can produce valuations based on a snapshot in time.  For example, if you need to adjust an old valuation, this can be done seamlessly with the adjusted balances flowing through into subsequent periods automatically and even NAVs and the share registry transactions derived from them being automatically recalculated/adjusted.

Master/Feeder Price Updates | NAV prices are automatically updated from underlying master funds to investing feeder funds.  The pricing of internal transactions between master and feeders is automatically regenerated by PFS-PAXUS if a NAV changes in the structure.

Batch Valuations | Users can create batches of valuations for closely related funds - e.g. if 5 related funds are to be valued at the same time, all 5 valuations can be initiated at the push of a button, with any defined master/feeder fund prices automatically updated.

Administration, Management And Period Accruals | PFS-PAXUS calculates administration, management and up to 10 user defined periodic accruals per fund according to a number of different parameters.  Fees can be calculated based on asset values as of the opening date, adjusted opening capital or end date asset balance for the vaulation period.  Certain categories in the general ledger can be excluded from the asset calculation.  Tiered administration fee calculations and minimum periodic charges are also catered for.  Accounting entries are generated and automatically posted to the general ledger.

Incentive (Performance) Fees | One of the strongest features of PFS-PAXUS is its ability to perform incentive fee calculations fo rmulti-series funds (using the "Series of shares and consolidation" method), equalisation funds (using the offshore per share equalisation model) and partnerships.

Performance Fee Crystallisation | When a fund reaches a HWM, the performance fees are crystallised automatically, including automated GL postings.

In addition, when a shareholder redeems in an interim period, the performance fee is crystallised automatically.

Hurdle Rates | Hurdle rates can be set up for each NAV valuation period and incorporated in the incentive fee calculations.  Conditional hurdle rates are also supported.

Fee Payments | Cash payments of fees can be automated using the PFS-PAXUS fee payments template.

General Ledger Module

Structure | PFS-PAXUS contains a powerful multi-currency general ledger module for preparation of fund NAV and financial statements.  PFS-PAXUS maintains an individual trial balance for each partner in a partnership or each series in a fund, as well as an aggregate trial balance for the overall entity.  Thus each share series or partners assets can be tied directly to the underlying balance sheets and P&L performance.  The general ledger calculates balances at any point in time, meaning that operations like (a) running reports for old dates and (b) posting transactions/journal for future or past dates is a seamless operation. 

Value Date Posting | Journal entries can be posted to future, present and past value dates in any currency.

Close Off Ability | Once a fund valuation is finalised a period can be locked off, preventing inadvertant postings of transactions to that period.

Powerful Allocation Functionality | 4 automatic allocation methods are provided at a fund level, including gross method, net method, committed capital method and periodic fixed percent.  User friendly templates allow for easy posting of non pro-rata journal entries to individual or groups of classes/series/partners.  These can also be based on relative capital of selected class/partners/series, new (hot) issue participation or specified percentages.  Balances can be posted at a "general" fund level or at class/series/partners level or groups thereof.

Uploads | Users can upload jornal entries directly from a spreadsheet or use the standard input screens, depending on their preference.

Traceability | Each shareholder, security and GL journal transaction can be traced directly to the underlying entries in the GL.

Automated Currency Revaluation | An automated currency revaluation marks to market the general ledger balances at the applicable foreign exchange rates.

Share Registry Module

Accounting and Registry | Share registry transactions are entered directly to the system template or can be uploaded from a spreadseet.  Where the NAV for the share trasaction has not been finalised, the user has the option to 'lock' the subscription amount so that the number of units for the trasaction is automatically regenerated once the NAV price is finalise dfo rthe trasaction date.  For redemptions, the user has the option to lock the redemption units or value.  The system regenerates the transaction as the price is finalised and posts the accounting entries.

Shareholder Information And Details | An extensive list of shareholder contact/classification details are stored globally, optionally stored in encrypted format to meet specific jurisdictional requirements.

Series Consolidations/Roll-Ups | Udner the PFS-PAXUS multi-series model, series can be automatically consolidated into a lead series.  This normally takes place once a HWM has been set for the lead and source series.

Investor Statements | Contract notes, NAV statements and 11 other types of investor communication can be generated for post, sent by email or sent from a facsimile server.  Copies can be sent to an unlimited number of related third parties.  The "Statement Builder" functionality included in the application allows users to design their own statement formats and link the designs to individual funds.

Web Reporting | Investor statements and numerous financial and portfolio reports can be published on the Web via an automated hand off to CorrectNet's offering is available at www.correctnet.com

Equalisation | Offshore funds with incentive/performance fees generally have to choose between adopting the separate series of shares method or the equalisation method to ensure that incentive fees are equitably accounted for.  In general, equalisation is a process of adjusting the numbers of shares held by shareholders to compensate for the effect of changing levels of capital on the calculation of incentive fees, writing access.  For example, fund level access restrictions are maintained.  Equalisation calculations can be complex and difficult to explain to investors.  PFS-PAXUS has an industry leading per share equalisation model and for backward compatibility purposes also provides some support for the older depreciation deposit model.  While many funds prefer the seperate series of shares method for its relative simplicitiy and transparency, equalisation may be preferable in some situations e.g. where only one series is practical because of stock exchange listing requirements.  The PFS-PAXUS equalisation model calculates equalisation deficits and credits depending on the per share relative performance of the fund in comparison to the High Water Marks and revalues the deficits or credits on each NAV date depending on the performance of the fund.  Upon redemption or HWM date, the equalisation units are converted to shares as appropriate.

Document and Image Linking | Documents and images stored on the network can be linked to certain PFS-PAXUS system tables.  For example, images of authorised signatory lists can be linked to investors and information memoranda can be linked to funds.

AML | An Anti-Money Laundering module allows users to define and maintain AML check lists depending on the fund/category/jurisdiction/location of the individual investors.  Ouststanding/follow up reports are produced by this module for user action.  It is integrated with the Share registry module so that users are warned or blocked (depending on settings) when entering share registry transactions if AML outstandings exist.

Corporate Secretarial | A corporate secretarial module allows for the storage of extensive information on company requirements, such as directors details, filing dates accounts lodgement parties, license fee payment dates, date of incorporation, jurisdictions, agents, AGM dates and auditors.

Technical Architecture

PFS-PAXUS is a two-tier server system.  The relational database is Microsoft SQL server 2005/2008 and the front end is developed in Powerbuilder v11.2.  We recommend that client workstations use Microsoft Window 2000, XP, Vista or greater.

As an open relational database users can access the system via any Microsoft ODBC report-writing tool (e.g. Access, Excel, Delphi, Crystal Reports).  The application's security is integrated into such report client server application.  It can operate across a wide area network (WAN) or Internet connection including Citrix/Terminal Server environments.  Nearly all system processing is performed on the server in order to reduce network traffic and enhance security.  Frequently used data is cached in the local client workstation to optimise WAN/Internet performance.

PFS-PAXUS Support

Pacific Fund Systems prides itself on providing the highest level of support.  Technical support offices are located in Sydney, Australia and St. Petersburg, Russia, with additional business support also available from an office in London.  Across these 3 offices most timezones are covered.  Should a system problem or query be encountered, users can log the problem via the Pacifc Fund Systems website into a global support tracking database.  The support team will rapidly investigate the problem and track its resolution through to its ultimate conclusion.  The current status  of all items can be seen from the support website, to assist in the resolution of queries.  Pacific Fund Systems provides a method of exporting a sanitised (i.e. scramble confidential details such as investor names and securities held) database to the support offices for analysis.  Although this is optional, it assists in rapid resolution of any issues.

Fund Reporting

Standard Reports | Over 100 standard reports provide a number of different formats for financial statements, detailed workings of fee calculations (adminsitration, management, custody, incentive and equalisation), share registry reports and securities/portfolio related reports.  Groups of frequently run reports can be defined in a batch, thus saving a user from running the reports individually.  All standard reports can be saved in spreadsheet, HTML and other formats.