An investment firm’s vendor agreements and relationships are a core component of its success. Your vendor services agreements should be monitored for possible upgrades as your firm evolves. Below is a guide to understanding when and why you may be entitled to upgraded vendor terms.

Key Factors that Impact Vendor Contract Terms Include:

Increase in AUM:

Fund-Level AUM Increase

• When a single fund raises more capital or grows due to strong performance, the Assets Under Management (AUM) increase.
• A larger fund means more capital is available to support its obligations, making it more appealing from a credit perspective.

Manager-Level AUM Increase

• Launching additional funds under the investment manager’s umbrella boosts the overall AUM.

Increased AUM can enhance the revenue opportunity for vendors.

Increase in Head Count:

User Growth

• A larger user base demonstrates/enhances your value to the vendor, potentially leading to better pricing, enhanced services, and more responsive/comprehensive support.

Incrase in Number of Investment Entites & Accounts:

Number of Accounts

• The more accounts your firm has, the more revenue you will produce for certain vendors, which increases your value as a client and justifies an upgrade in your contract terms.

Vendor pricing varies across the industry depending on the services provided and the factors above.

Leveraging Third Parties with Dynamic Upgrading Technology

In the complex and fast-paced world of investment funds, keeping track of factors that may entitle you to contract upgrades can be challenging. Consider working with third-party providers that offer dynamic upgrading technology. These software tools:

• Automatically assess your client rank.
• Generate potential upgrades based on real-time changes to the factors influencing your contract terms.

By integrating such technology, you ensure that your vendor agreements are always aligned with your current client profile. These third-party providers can also assist with approaching your vendors and negotiating targeted Amendments or Amended & Restated Agreements to implement these upgrades.

In conclusion, recognizing when to ask for an upgrade to your vendor contract terms involves monitoring key factors such as AUM growth, head count and number of accounts. By staying proactive and leveraging advanced technology, you ensure that your critical contracts remain fair and reflective of your firm’s performance and credentials.

How can QDS help

The QDS Software Platform can assist your firm with assessing your rank, monitoring factors as your firm grows, and upgrading your vendor contracts terms.

Click below to request a call or demo and learn more about how QDS and Quadrangle can benefit your firm.