Reimagining Business Spend Operations for Alternative Investment Firms 

A unified, automated approach to expense allocation, vendor management, payment execution and compliance 

By Steven Petersen

The front office in alternative investments has evolved significantly in the past few years. Advanced analytics, automation, multi-asset strategies and real-time decision making are commonplace. But too often the operational infrastructure behind the scenes tells a fundamentally different story.

Expense allocation, vendor management, contract oversight and invoice processing which are functions vital to governance still rely on manual work, spreadsheets, email approvals and disconnected systems. We spend way too much time, energy and money paying bills, allocating expenses, booking entries, booking wires, and all we get out of it is a paid bill. Not to mention, the manual process lends itself to inadequate allocation, misallocations, delayed payments, compliance risks and finance teams constantly playing catch up because they are doing manual work. 

The consequences of manual processes are quite costly as they slow fund operations and negatively impact investors. The Securities and Exchange Commission has stated that expense allocation is a 2025 exam priority. Regulators around the world are asking tougher questions about how costs are shared across funds, entities, strategies and geographies. 

Fund structures are complex. What looks like a simple payment has the potential to create complicated reconciliations. One vendor can impact multiple entities. The margin for error is quite high without automation. 

Stavtar, founded by a CFO and CTO of large alternative asset management firms, identified these challenges in the back-office and created a cloud platform to address the operational inefficiencies in alternative investments. Stavtar’s flagship StavPay platform offers alternative investment firms a technology layer that sits above all other financial and fund technologies, capturing, housing, and managing vendors, contracts and invoices in one unified system. It serves as the sole source of truth for all financial operations and frees finance teams to focus on higher-value work.

There is a real imperative for end-to-end automation of expense allocations through digitized vendor management, contract oversight, invoice processing and payment execution. This is particularly true for firms looking to scale and future-proof their operations.

The Expense Allocation Challenge in Alternative Investments

Expense allocation is a vital process that impacts fund performance, compliance and investor trust. Each market participant faces its own unique challenges:

• Hedge Funds: Managing execution fees, research costs and soft dollar arrangements across the investment lifecycle.
• Private Equity and Venture Capital: Allocating management fees, legal expenses, deal execution costs and broken deal costs across multiple funds and portfolio companies as well as tracking, allocating and invoicing time spent down to their portfolio companies. 
• Pension Funds and Sovereign Wealth Funds: Operating across multiple geographies with complex multi-entity expense structures.
• Family Offices, Foundations and Endowments: Managing investment management costs, vendor payments, discretionary spending and philanthropic activities with complete transparency. 

The traditional model of relying on disparate email chains, disconnected fund administrators and manual reconciliations is no longer viable. Growing operational inefficiencies and potential compliance risks have started forcing alternative investment firms to rethink how they manage expense allocations. 

The Solution to a Vexing Problem: End-to-End Automation of Expense Allocation

Modern investment firms are complex businesses. The most visionary and innovative firms are adopting technology platforms that automate the entire expense allocation workflow through a unified system. A fully automated platform includes the following elements:

• Vendor Management and Contract Oversight
  • Vendors, contracts and payment terms are stored centrally.
  • Custom multi-layer expense allocation rules are implemented and standardized.
  • Automated alerts regarding upcoming cancel lead times and auto renewals. 
• Automated Invoice Processing and Expense Classification
  • Artificial intelligence and machine learning to capture, extract and process data from invoices and choosing workflows, including a human loop of support to review.
  • Intelligent classification of expenses based on custom built and predefined allocation rules using unlimited underlying attributes.
• Streamlined Approval Workflows
  • Approvals are routed based on the rules, policies and thresholds defined by the firm.
  • Audit trails that ensure the appropriate review of expenses and their allocations.
• Single Click Payments and Reconciliation
  • Direct payments through a single click via ACH, RTP, USD and cross-border wires.
  • Integration to general ledgers for both the management company and the funds for automatic booking to ensure accurate financial reporting and easy audit.
  • Real-time, robust and dynamic reporting from the highest to lowest level of detail for rapid, informed decision making.

Digitizing every step of the expense allocation workflow empowers firms to eliminate bottlenecks, ensure compliance and achieve real-time visibility into cost structures.

Interoperability Across Financial and Fund Technologies

Most alternative investment firms use multiple platforms for wire payments, fund administration, treasury management and banking. This is particularly true for the larger firms that operate across multiple jurisdictions. Platform fragmentation is a barrier to modernization and causes reconciliation challenges. These dynamics have led to significant market demand for an expense allocation system that can interoperate with general ledgers, banking portals, wire platforms, treasury management systems, soft dollar providers, fintech data aggregators and payment infrastructure providers.

By integrating with and unifying these systems, alternative investment firms can achieve straight-through processing, guaranteeing that expenses are correctly captured, allocated, approved and settled in a single automated workflow. 

From Approval to Execution: Streamlining Payment Automation

Fund managers often view invoice approvals and payment execution as separate workflows. Consequently, finance teams often initiate payments manually by logging into banking portals and subsequently reconciling transactions. 

A fully automated end-to-end workflow removes this friction by integrating payments directly into the expense workflow, allowing hedge funds, private equity firms and other alternative investment managers to:

• Approve and execute vendor payments from a single interface.
• Release payments via ACH, RTP, USD and cross-border wires. 
• Automate settlement and reconciliation with GL systems. 
• One platform to review accounts and balances across the entire enterprise. 

This well-defined digitized process ensures that every payment is matched to the correct invoice, vendor contract and fund without any manual intervention. Instant wires! No spreadsheets!

A Compliance-Ready, Scalable Platform 

There is an increased regulatory focus on expense allocation and alternative investment firms are finding it necessary to demonstrate that their processes are transparent and compliant. Industry-leading ‘Office of the CFO’ platforms enable compliance by enforcing allocation fund allocation rules, automating tax reporting and providing real-time dashboards that can be reviewed by all stakeholders. 

The Future of Expense Allocation, Vendor Management and Payment Execution for Alternative Investment Managers is Digital and Automated  

Expense allocations have always been viewed as a tedious and monotonous back- office function. However, given the everchanging investor, regulatory, market and technological landscape where speed, scale, transparency and efficiency are key drivers, manual workflows are simply not sustainable. End-to-end automation through a unified platform that digitizes vendor management, contract oversight, invoice capture, allocation and payments is one of today’s most important imperatives for finance leaders at alternative investment firms. The firms that adapt to and embrace automated, rule-based expense workflows are positioned for success and scale, as they will mitigate risk, enhance efficiency, and foster strong investor relationships.

Steven Petersen is the Co-Founder of Stavtar, a leading fintech company that fully automates end-to-end business spend management for alternative investment managers. Stavtar’s flagship Office of the CFO platform, StavPay, is currently used by more than 100 alternative investment managers with over $2.3 Trillion of assets under management and growing quickly. 

This article was originally published in e-Forex Magazine on April 28, 2025. 

Reimagining business spend operations for Alternative Investment firms – e-Forex