Why Emerging Hedge Fund Managers Are Turning to Outsourcing

Updated: March 17, 2025

As the hedge fund industry grows and evolves, the fortunes of emerging managers are coming into sharper focus. While many larger funds have weathered the recent storms, start-up funds and emerging fund managers face a growing number of hurdles.

A new Insight Report from Hedgeweek, The Next Generation: How emerging managers are adapting to the new hedge fund landscape, examines how emerging hedge fund managers have fared in this environment. One of the most prominent findings in the report is the desire of these managers to outsource non-core functions of the business, such as finance & accounting and HR support, in order to free up more time to focus on alpha generation.

Outsourcing Back-Office F&A Administrative Functions

One-third of emerging hedge fund managers said they plan to outsource more of their administrative and F&A operational functions in the future, according to the report, while none of the managers said they plan to outsource less. This is almost double the industry average (17%) of hedge fund managers who plan to outsource in the future.

In the report, some managers said that the shift to remote work caused by the pandemic demonstrated that certain activities no longer have to be performed under one roof. This helped further accelerate the outsourcing trend. As one respondent put it, “We had 10 years of digitization within one year.”

Another respondent attributed the trend partly to the pandemic, along with other factors such as the changing landscape, the importance of cybersecurity and the “importance of information technology in running a modern business.”

In Search of Specialized Expertise

According to the report, cost-squeezed emerging hedge fund managers are now willing to outsource more of their business functions to third-party service providers, like Consero, that can offer specialized expertise across a variety of areas including technology, finance & accounting administration, HR support and payroll functions. Meanwhile, they are keeping core competencies like portfolio management and trading activities in-house.

Outsourcing has helped ensure that emerging managers are better able to focus on alpha generation so far this year. This, in turn, is helping them build a track record that investors are willing to commit to in the increasingly volatile market environment we now face.

The report noted that the expansion of outsourced services is bringing a degree of comfort to newer hedge funds. This is especially true for quantitative-focused managers who face particularly acute administrative and technology challenges.

Outsourcing Finance and Accounting Functions

Finance & accounting, human resource management and payroll administration are examples back-office administrative areas where it often makes sense for emerging hedge fund managers to outsource. A third-party service provider can handle all of a fund’s finance & accounting functions along with administrative functions on an outsourced basis, freeing up the fund manager to spend more time focusing on alpha generation.

These services are sometimes referred to as Finance as a Service, or FaaS. FaaS goes beyond outsourced accounting to include a full suite of staff, services and software that’s capable of managing a fund’s entire finance and accounting operations. In other words, FaaS is a one-stop F&A and administrative services shop.

FaaS features flexible and transparent pricing, which makes it easy to forecast costs as the fund’s needs change in the future. This means that a FaaS provider charges based on the service offered, not by the hour or based on the level of staff assigned to the fund. As a result, hedge funds know exactly what they’re paying for and how their costs will rise or fall as they scale up or down.

Consero: The FaaS Specialists

Consero offers Finance as a Service to emerging hedge fund managers, PE/VC firms and their portfolio companies. If you would like to discuss the potential benefits of FaaS for your fund, please request a complimentary consultation

Related Resources

Blue neural network interconnected with money symbols
ArticleMetrics

5 Metrics Private Equity Investors Want to See

During the due diligence process, PE investors look at key metrics to feel confident in your company's financial health and growth prospects before investing.
Taxes

Common accounting mistakes

  Accounting mistakes are common among small businesses, but they are unique in their ability to inflict damage long after they initially appear in balance ...
Audits & Due DiligenceEvents and Webinars

3 Tips To Be Audit And Due Diligence Ready, And Why It Matters with Mike Dansby

Lack of audit readiness can result in costly errors, delays in deals, or a reduction in company valuation during due diligence. Here's how to avoid ...
ArticleCFO Support

CFO Value Creation in PE-Backed Exits

Consero's Tom Pierce and Jason Adams, BV Investment Partners, joined ACG's Middle Market Growth podcast to explain how PE-backed CFOs create value in successful exits.
Case Study

CFO gains comfort to step out of accounting function and operate in a more strategic role

Before working with Consero, Phil Murray, VP of Finance & Administration, was challenged with high volume transactions and a limited team with processes and controls ...
ArticleFinancial Leadership

The 5 Laws of Cash Management in a Crisis

Everyone understands that cash management is a top priority when trouble hits, but the scale and intensity of the fallout from COVID-19 leaves little room ...

Finance as a Service

Cutting edge technology, processes, and people in a fully-managed solution to deliver precise financial visibility and improved operational scalability, plus a lower and more predictable cost structure. 

Flex Finance

Keep your existing technology and processes. We can manage the back-office F&A function from end-to-end process, including closing the books. When you need skilled talent, we can supplement your F&A team.

Advisory Services

Expert advice and strategies to help you grow.

• CFO Advisory Services
• FP&A and Reporting
• Technical Accounting & Clean-Up

Consero FaaS: Disrupting the Outdated Traditional F&A Model

Transformation
  • Cash to GAAP conversion
  • Clean-up work
  • Interim oversight & support
  • Accounting software Implementation

Build it Yourself Solution

  • CFO / Interim CFO
  • Consultants / VARs

Consero FaaS Solution

  • CFO / Interim CFO
  • or Consero Interim CFO
  • Consero Setup/Transformation
Ongoing F&A
  • Monthly financials
  • Daily accounting support
  • Management reporting
  • Integrate add-on acquisitions

Build it Yourself Solution

  • CFO
  • Controllers & Accounting Team
  • Enterprise Accounting Applications

Consero FaaS Solution

  • CFO
  • or Consero Fractional CFO
  • Consero FaaS Enterprise F&A Software and Services

New PE Platform Investment F&A Challenges

Founder Owned Company Accounting:
  • Existing accounting done on a cash/hybrid basis
  • Run on SMB accounting software and other disparate applications
  • Inability to produce auditable financials
  • Lack of know-how to develop projections & KPIs
  • No consistency/structure to customer contracts
  • Underqualified staff
  • Non-scalable manual processes
Carve-Out Accounting:
  • Required to move off parent company accounting applications in a timely fashion
  • Have to build an entire F&A team
  • No documented operational policies and procedures
To Optimized Finance & Accounting:
  • Monthly financials available in 5-10 business days
  • Audit and diligence ready support details
  • Integrated enterprise grade accounting software
  • Budget and forecast reporting
  • Business KPIs
  • Efficient & scalable processes for rolling in add-ons