06Jun

In the post-pandemic world, life at successful accounting firms will be very different from what it was just last year.

Partners will be more mentor than boss, engaging with staff in a more personal way than ever before. There will be a new emphasis on leadership and development. The consultative part of accounting will be center stage, as clients look for guidance and help in rebuilding their business. Technology adoption will be quicker and remote work will be an accepted practice.

Those predictions are the perspective of a group of accounting thought leaders interviewed by AccountingToday’s editor Danielle Lee.

“The pandemic is giving firms a reason to embrace change like never before,” Marc Rosenberg, president of The Rosenberg Associates, told Lee. “Why? Because they have (or will have) no choice. Life at CPA firms as we knew it pre-pandemic will never return. Normal is gone.”

With everyone working remotely, Angie Grissom, president of The Rainmaker Companies, said firm leaders are learning just how resilient their teams are. “A newfound confidence in the agility of teams will emerge,” she says.

The more progressive firms began embracing remote work long before anyone ever heard of COVID-19. Now the rest of the profession is discovering people can be as productive – or more – working remotely, which will lead to fewer hiring restrictions, says Jeff Phillips, CEO of Accountingfly.

“Some of your best people are not ever going to return to an office again, and I hope firms learn that’s OK,” he said. “If they learn that lesson, they’ll realize they can solve their own war for talent by quickly and easily hiring remote A-player talent based anywhere in the U.S.”

As the economy opens up and people return to work – millions already have – talent retention and training will be critical to firm success. Partners now “Need to be much more deliberate and planful about keeping in touch with staff, not only regarding their client work but their training, development and morale,” says Rosenberg.

Adds Sandra Wiley, president of Boomer Consulting, “As firms develop their strategies over the next few months, they should have a laser focus on talent retention and upskilling, process improvement, technology infrastructure, and new services for growth in the advisory area.”

Even the business model should be up for reconsideration, suggests Ron Baker, founder of the VeraSage Institute. “If you are still hourly billing, your firm is mired in a transactional relationship with your customers based upon inputs, and those are easy to sever when times are tough.”

More directly, Boomer Consulting’s L. Gary Boomer, says, “The existing business model does not meet the needs of most clients or firms. You should move to the subscription model in order to attract new business and retain existing clients. Value can be created through packaging and pricing.”

“Now is a great time to learn or change a habit,” he advised.

Summing up, Jody Padar, vice president of strategy at Botkeeper, declared, “We can’t go back to the way things were, so we need to get comfortable with the uncomfortableness we face.”

Photo by Dillon Shook on Unsplash

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Jun 6, 2023

Hedge Funds Ended Year with a Strong Finish

“Hedge funds performed well in 2020,” says the alternative assets intelligence firm Preqin.

With returns of 16.63% across all asset classes, hedge fund returns were ahead of the S&P 500 PR Index, which closed the year at 16.26%, according to the 2021 Preqin Global Hedge Fund Report. It was the asset class’ highest annual return since 2009.

Preqin said the best performing strategy was equities, with a 19.64% return. Credit strategies provided the lowest returns at 5.24%.

In addition to a strong upside, Preqin said, “Hedge funds also offered downside protection through lower levels of volatility over 2020 compared with the public markets.”

Accounts under management grew by 6% over 2019 to $3.87 trillion as of the end of November. Though modest, it was a significant turnaround from the first two quarters of the year when investors fled the sector for the lower cost and more passive UCITS (Undertakings Collective Investment in Transferable Securities) and ETFs (exchange traded funds).

“The direction of flow reversed in the third quarter,” Preqin says, “Suggesting an increasing investor preference for active management over tracking.”

As cautious as investors themselves, hedge fund professionals launched significantly fewer new funds. Liquidations exceeded new funds by 758 to 740 for “only the second year on record,” said Preqin. The previous time that happened was in 2019.

Still, Preqin listed 18,303 funds at the close of 2020, just behind the record of 18,391 recorded in 2018.

The report identifies what it describes as five “megatrends,” themes that will continue to shape the hedge fund industry:

  1. ESG – Typically described as social investing, ESG considers environmental, social, and governance issues in deciding on investment. Preqin says ESG “has moved into the mainstream and is a key consideration” for investors and fund managers.
  2. Capital consolidation – “Established managers are taking a growing share of capital raised across all alternative asset classes.”
  3. Diversification — Since 2016, investors’ primary reason for allocating to hedge funds has been diversification, says Preqin. That will continue, predicts the report, as “investors are more focused on low correlation than returns.”
  4. Customized solutions – The shift away from fund products can offer lower fees and allow investors and managers to take part in opportunities more equally.
  5. Rising allocation to alternatives – “Investors are increasing their alternatives allocations to produce better risk-adjusted returns and protect the downside.”

Preqin’s head of research insights David Lowery says, “After nine consecutive quarters of outflows, Q3 2020 marked the first quarter of net inflows, bringing much-needed optimism to the hedge fund industry. Established managers are taking a growing share of capital raised across all alternative asset classes, but investors are seemingly aware of the benefits of investing in first-time funds and are taking advantage of the large supply.”

Photo by Chris Liverani on Unsplash

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