An Interview with William Vastardis, President of Vastardis Capital Services™

What types of clients do you serve?
Our traditional clients are medium-sized fund companies, including large asset management firms that mainly manage separate accounts but also offer some fund products. We provide these clients with customized fund administration or operations support that spares them the expense and hassle of an in-house staff. They can focus resources on developing their investment capabilities.

A growing part of our business is investment operations outsourcing for endowments and foundations. We've found that medium-sized endowments and foundations face many of the same operational issues as the for-profit money managers we've traditionally handled. Our services let them hand over some or all of the operational aspects of managing their investments to Vastardis Capital, from dealing with the custodian to calculating performance and preparing reports for the board of trustees.

How does Vastardis Capital uniquely solve problems for endowments?
We give them access to sophisticated portfolio accounting systems and operations expertise at a price they can afford, and free up resources to strengthen their investment team. Endowment and foundation investing has become a lot more sophisticated in recent years. The accounting and performance issues of alternative asset classes such as private equity investments, real estate and derivatives are considerable. Yet many college endowments are so constrained by their budgets that they have to rely on the college-wide standard general ledger system to track their portfolios.

How do smaller fund companies benefit from hiring Vastardis Capital?
Outsourcing to Vastardis Capital makes sense for smaller firms because they can "rent" our expertise and technology without worrying about managing the back office. And they can call on our expertise at any time. Since we take away the hassle of managing operations tasks, senior managers at smaller firms can devote their attention to portfolio management. After all, that's how they grow their assets and where they stake their reputations.

Maintaining an in-house fund oversight or administration team only makes sense for large fund companies, such as Vanguard, where I worked for 13 years. They can afford to maintain a staff and the systems to support them, because they can spread the costs over their huge asset base. If they choose to outsource these services, they have the clout to demand attention from the big custodian banks.

How did your experience at Vanguard prepare you?
I started as a fund accountant at Vanguard in the late 1970's when there were less than 100 employees, and ended up a vice president and head of the private label fund administration group. When I left in 1992, there were about 3,000 employees. I'm proud to have helped grow a mutual fund powerhouse.

What led you to start Vastardis Capital?
I wanted to repeat our success with the Private Label Group at Vanguard. I saw an opportunity to offer the same high-quality fund administration and oversight services on an outsourced basis to the smaller fund groups that big service providers don't take very good care of. I believe the partnership of a boutique investment operations firm and a medium-sized investment organization is a win-win situation, both from an operational and a financial standpoint.

Besides helping clients become leaner and more focused, how does Vastardis Capital win?
Vastardis Capital wins because we can hire first-class operations people and create a career path that allows us to retain them. Smaller investment management firms, whether they're for-profit or not-for-profit, can't offer much professional growth to their back office staff. The prestige jobs are in portfolio management, and the junior person who's hired to track performance soon gets itchy to move on to the investment side. The turnover is very high for these support positions.

Operations is the core of our business, so we attract people who want to increase their mastery of accounting, compliance and regulatory issues. We are a young firm, but the credentials of our staff are impressive: CPAs, MBAs and JDs with years of experience in investment operations.

Why should a client pick Vastardis Capital for fund administration over a large fund service provider?
We offer a few advantages over the fund administration services the big custodian banks provide. First, fund administration is a core business for us, so clients are confident they are receiving our full attention. Our larger competitors often view fund administration as a secondary line, behind custody and fund accounting. Second, the big banks gear their services to their biggest clients. If you're not in that group, you have to accept a "one size fits all" approach. Their services may be cheaper than ours, but they don't provide the tailored, personalized approach that we do. Third, we offer intelligent, adaptive use of the most current technology. Many large providers are burdened with outdated software and hardware, and can't adapt their information systems to change as quickly as we can.

Why do you call Vastardis Capital an investment operations "boutique"?
We prefer to work closely with clients to customize our services to their needs, much like boutique investment firms specialize in a limited universe of strategies which they offer to a small set of investors. Our vision is not to serve every firm in the investment business. Our clients appreciate being part of a select group, and treat us as their partners. Because we manage growth very carefully, our senior management staff is readily available when our clients need them. Our clients present lots of interesting issues, and we love finding creative solutions to these challenges.

How is Vastardis Capital's approach to technology unique?
As a new firm, we are fortunate not to be burdened by legacy systems that have been endlessly tweaked and reworked. Our approach is very flexible. We maintain an in-house data warehouse that is a single source for clean, validated data. We then take a best-of-breed functional approach, employing industry-leading applications for specific purposes. For instance, we use The Burgiss Group's Private-i® to track private equity investments and Charles River Development's compliance module. We're always looking at new software. And if we can't buy the right software, our technology staff builds it.

What services don't you offer?
We don't offer services that involve heavy processing, like those required for daily priced mutual funds. Fund accounting and transfer agent services for such funds are ideally suited to the custodian banks. We don't do extensive front-end trade order entry, although for the right client we would partner with a firm that specializes in trade processing management. Also, given the heavy time commitment, we only fill the principal financial officer and chief compliance officer roles for clients with whom we have taken on more administration or operations responsibility.