We sat down with Steve Katchur, Founder and CEO of Blue Ribbon CFOs to discuss how investment managers are rethinking financial leadership and addressing the question of whether a firm truly needs a CFO.
Q: Let’s get right to it. Do investment firms really need CFO-level expertise?
A: A prospective client recently asked me why they would need a CFO if they already had top-tier providers for fund admin, audit, tax, and prime brokerage. Here’s what I said: financial operations tend to run smoothly, until they don’t. And when things go wrong, the fallout is messy, costly, and a major distraction from managing the portfolio. Hiring a qualified outsourced CFO firm is one of the smartest non-investment decisions an emerging manager can make. The investment team can focus on their core competencies and rest assured that finance and accounting are being properly managed.
Q: But what about emerging managers, doesn’t a full-time CFO feel like overkill?
A: Yes, it might, but that’s a trap. Too many firms think they can get by recruiting an inexpensive, junior hire to keep an eye on things. But, in an industry where margins are being squeezed and LPs expect transparency, just getting by doesn’t cut it. Outsourced CFOs give firms access to top-tier strategic leadership without the full-time price tag. It’s like having enterprise-grade financial muscle, scaled to only what you need, when you need it.
Q: Can’t finance duties just be divided among the team? Everyone’s good with numbers, right?
A: That’s like saying anyone who enjoys jogging can show up to the New York City Marathon and expect to win. Yes, your investment team is sharp and likely has impressive academic and professional credentials. But shouldn’t their time be focused on what they do best: managing the portfolio? You wouldn’t ask your accountant to execute trades. So why would you expect your research team to handle accounting, forecasting, and financial reporting? That’s the role of a CFO. It’s not a side task; it’s a full-time mindset that ties financial operations back to business strategy.
Q: What about accounting policies and procedures? Do they really matter?
A: Strong policies and procedures are the building blocks of a well-run firm and are essential for setting expectations and ensuring accountability. Ignoring them could destroy your firm.
Regulators don’t just encourage them; they expect you develop them and be able to demonstrate how you’re using them. Today’s investors are more sophisticated than ever and before committing capital, they want clear proof that a manager operates with discipline and control. The bottom line is emerging managers need to think and operate like an institution.
Q: What role does a CFO play in compliance?
A: A huge one. Investment management is one of the most heavily regulated industries. An outsourced CFO can manage several important aspects of a manager’s compliance program including establishing and enforcing proper controls, maintaining detailed books and records, and conducting proper expense allocation across your client funds. Investors are keen to notice if you treat compliance as a “check-the-box” exercise versus integrating it into the DNA of your firm.
Q: How does having a CFO impact attracting institutional investors?
A: Institutional investors care about more than just a great return profile, they expect transparency, strong governance, and operational discipline. The CFO plays an integral role in meeting those expectations, often leading due diligence responses, managing financial reporting, and demonstrating that the firm is well-run from both front and back office perspectives. The presence of strong CFO isn’t necessarily what causes an institutional investor to commit significant capital, but the absence of one almost certainly can cause them to pass.
Q: It sounds like financial leadership is becoming a competitive edge. Agree?
A: Completely. In a world where investment strategies are commoditized, operational excellence is what sets firms apart. Investors expect transparency, detailed reporting, and ironclad processes. A good CFO doesn’t just keep you compliant, they help you turn operations into a revenue center.
Q: What if a firm can’t justify a full-time CFO?
A: That’s exactly why a service like ours is increasingly attractive to managers. We provide clients with strategic leadership without the full-time overhead. Instead of cutting corners by hiring inexperienced talent, or worse, ignoring the back office, managers should consider a service like ours that steps in with multiple levels of coverage to bridge the gap while the asset base grows.
For more information on the services Blue Ribbon CFOs provides visit: https://www.blueribboncfos.com/services