Here are some key quotes from my latest podcast with Gary Berger, Partner at CohnReznick and the firm’s Northeast Financial Services Industry Leader, discussing the audit, tax and advisory practice for private funds:

“CohnReznick already had a pretty good financial services practice, but what I was looking to do is really take it to the next level.”

“I think everyone should have an accounting degree – understand when you’re looking at a balance sheet or P&L. If you’re in marketing or business development, whatever. It’s nice to look at the financial statements and understand what it means.”

“And [my bosses] said to me, ‘Hey, would you like to get involved in the hedge fund industry?’ And I was like, ‘well, what’s a hedge fund?’ And then I researched it, that was kind of cool. They trade securities by very wealthy portfolio managers. So I said, ‘Let me let me give it a shot.’”

“The whole industry has changed dramatically with technology and trading, raising capital, etc., building infrastructure controls, operational due diligence.  The whole thing has just matured.”

“In the hedge fund industry, in the alternatives industry, when CFOs call or PMs call and they have a question, you have to be very, very responsive and they want answers.  It can’t be, ‘we’ll get back to you tomorrow or the next day, or I got to get six people involved.’”

“As long as you are switching from one [accounting] firm to another that’s quality and is known, it’s not an issue. One thing I’d say it’s very difficult to switch if you have a new private fund for example, that was just formed but was just seeded and when it’s been only a for a year or so.  Then it’s a lot harder to switch.”

“I usually work with not only the CFOs of the hedge funds, but also the legal counsel to go through the various structuring – whether it be setting up a blocker or using treaties or different structures in Europe or whatever it might be – to reduce the tax liability.”

“I see this a lot. Managers want to be aligned with their investors, okay. And that makes a lot of sense. Unfortunately, sometimes they do things that are so convoluted and complex, that it becomes not an industry standard.”

“You know, investors don’t want to sit down with their pad and pencil to figure out what’s really going on.  They want to say, ‘Okay, I’m used to this particular fee structure, check the box, good.’ So we sort of have to reel [new managers] in sometimes to say ‘I get what you’re trying to do.’”

“Firms like ours and other big firms are using AI to their benefit to speed up the audit process, whether it be taking a client’s general ledger or running through some sophisticated program and coming up with any data we want.”

“You have to look and feel institutional to be successful. So you should cut what you can. But you have to have professionals in there and spend money wisely.”

“When you go back to maybe 5-10 years ago, definitely 10 years ago, outsourcing the CFO role was looked on as a negative.”

“I think certain strategies fall in and out of favor. The trends, they come and go. So I think they’re hard to predict. I think what’s going to happen, which I know is going to be consistent, is that the hard part always is raising capital.”

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