Partnerships in managed services built on trust and powered by the right technology are helping investment operation leaders navigate an increasingly complex investment and regulatory environment without adding headcount.
This was the focus of a recent panel discussion at Connect New York, featuring industry experts Chris Sullivan of CastleKnight Management, Michael Herring of Covara Capital, and Clearwater Analytics’ own Molly Petrowiak and Ian McDonald.
From the discussions, six key insights emerged:
Taken together, these insights point to one recurring theme. Trust, people and the right technologies build the foundation for a successful managed services partnership.
Giving a third-party responsibility for your middle and back office requires genuine confidence that they will act as an extension of your firm and not a vendor operating at arm’s length.
Mike Herring framed the outsourcing decision directly: it is not transactional, it is relational.
“Partnerships encounter challenges, the real question is whether you trust the people beside you to solve them quickly and effectively.”
— Michael Herring, COO/CFO/CCO, Covara Capital
Trust, the panel agreed, is earned through consistency, in accuracy, communication, and how exceptions are handled day to day. It is not built in the absence of problems; it is built in how problems are resolved.
The middle office work such as trade capture, allocation and matching, reconciliation, asset servicing, break resolution, and the back-office disciplines of position P&L, NAV accounting, and private credit processing all require people who understand the full lifecycle of a trade, not just the system. Molly Petrowiak was direct about what differentiates a managed services offering that holds up under pressure: the people behind it. Her team of 200+ brings experience from across the hedge fund and asset management industry, hiring talent from hedge funds, prime brokers, fund admins, and buy-side firms. That depth matters when a fund is trading complex instruments, navigating a break late in the day, or onboarding a new prime broker relationship with stringent time constraints.
“Our team has sat on the other side of these end-to-end workflows. They know what a prime broker expects, what a fund admin needs, and where things go wrong, because they have lived it.”
— Molly Petrowiak, Global Head of Managed Services, Clearwater Analytics
The panel discussed how AI is embedded in the infrastructure, not as a future roadmap item, but as a live capability already running inside the managed services operation. Two applications stood out.
The first is AI embedded directly in the reconciliation platform. Rather than analysts manually triaging exception queues, machine learning models now work through reconciliation breaks, pattern-matching against historical resolution data to surface likely causes and suggested fixes. The result is faster exception resolution, fewer manual touchpoints, and a reconciliation function that improves and learns as it processes more data.
“AI is not something we are planning to add — it is already in the platform, working the breaks alongside our team. The goal is to let our people focus on the judgement calls that actually need a human and expertise.”
— Molly Petrowiak, Global Head of Managed Services, Clearwater Analytics
The second application is more specialised and speaks directly to the complexity of credit strategies: AI agents that read and extract data from bank loan PDF documents, trade confirmations, term sheets, credit agreements and automatically book the resulting positions into the PMS system. Bank debt has historically been one of the most manually intensive workflows in hedge fund operations. PDFs arrive in inconsistent formats at any given time, terminology varies across counterparties, and a single document can contain dozens of fields with 100 pages that need to be correctly mapped and booked. The Clearwater team now deploys AI agents to handle that extraction and booking automatically, materially reducing processing time and the risk of manual error. For credit-focused funds like CastleKnight, this is not a marginal improvement, it changes the economics and reliability of running a private credit and bank debt book entirely.
For CastleKnight, a fund whose entire identity is built around credit, the platform had to do more than manage trades, it had to handle the full lifecycle of credit instruments: bank debt processing, CDS booking and unwinds, credit facility management, and the reconciliation and accounting workflows that come with them. Chris Sullivan pushed hard on these requirements, working directly with the product team to build out the logic.
“I have built out end to end operations before and ran it. To build out the full technology stack and hire the people to run it — that is an extra burden I simply do not want to do again.”
— Chris Sullivan, COO/CFO/CCO, CastleKnight Management
Ian McDonald provided insights around the feedback loop in Clearwater, highlighting that it is a structural part of how the platform and managed services offering evolves. From his viewpoint this dynamic represents something that is underappreciated in how managed services is typically marketed from his point of view. It is not just a delivery model. Clients like Covara and Castleknight who engage deeply with the product team are critical to shaping product direction and priorities.
Enfusion by Clearwater’s product development process actively routes client enhancement requests through a structured evaluation framework, scoring ideas on client population breadth, votes, demand, strategic alignment, and impact. Ideas that reach a threshold are promoted to the product roadmap and developed with our clients for all clients making the platform and offering materially stronger.
Both Chris and Mike described the same fundamental shift: as their firms have grown in AUM, strategy complexity, market and regulatory obligation, the managed services model has absorbed that growth. Covara launched and reached full regulatory compliance in under three months with Clearwater Middle office guidance and expertise, while CastleKnight has scaled from $75 million to $4 billion without building a proportional internal operations team.
By onboarding onto Enfusion Managed Services, Covara Capital completed its full operational build, including SEC examination and registration in under three months. For a new fund, that pace changes everything: it accelerates capital raising, trading readiness, and investor credibility.
— Michael Herring, COO/CFO/CCO, Covara Capital
The freed-up capacity does not disappear, it gets redirected toward what actually generates alpha: investor relationships, portfolio strategy, and the higher value work that differentiates the fund. That is the real value proposition, and it compounds as the firm grows.
The panel was aligned on one guiding principle that makes a successful partnership, and this was discipline at the start. The first few months set the tone for everything that follows — and when relationships struggle later, the root cause is almost always something that was left undefined at the outset. The firms that extract the most value are those that invest in the partnership structure — not just the platform.
The critical disciplines are:
Managed services have evolved well beyond cost arbitrage. The firms getting the most from it are those that have chosen a partner with genuine domain depth, invested in the relationship from day one, and treated the engagement as a structural part of how they operate and grow. Add a team that has lived the workflows, a platform shaped by experts from all parties, and AI already working inside the operation — and the result is not just operational efficiency. It is a durable competitive advantage setting up clients structurally to grow and positioning them to pivot quickly on what comes next.
The common thread is discipline: in how the system is used, how roles are defined, how feedback is communicated, and how problems are owned. That discipline, built on a foundation of trust, is where operational alpha lives.
Chris Sullivan has built and run operations at some of the industry’s most respected firms — Blackstone, Credit Suisse, and Diameter Capital, before joining CastleKnight Management where he is partner and acts as COO, CFO and CCO. His job was to build the firm’s entire operational infrastructure on a single integrated platform. Today CastleKnight manages $4+ billion, trading a sophisticated credit book spanning corporate bonds, bank debt, CDS, and CDX. Chris has been an active participant in shaping the Enfusion platform itself, surfacing gaps and credit workflow requirements that have been developed into product features now used across the entire Enfusion client base. The relationship has had its moments of friction and growth, but today sits in a healthy strong, collaborative place.
Michael Herring joined Covara Capital as COO, CFO, and CCO to build the firm’s operational foundation from the ground up. Like Chris he is a veteran in this space with prior executive positions at Azore Capital, Caravel Management and Yara square partners. He made a deliberate decision to run fully on Managed Services from day one, a strategic choice to access capability and scale from launch, rather than building it incrementally and the results were tangible: Covara completed its full operational build and SEC examination and registration in under three months.
Molly Petrowiak Clearwater’s Global Head of Managed Services leads Clearwater’s global delivery of middle and back-office services and acts as the “one throat to choke”, who leads a team of over 200 specialists drawn from across the industry: prime brokers, fund administrators, middle-office operations, and hedge funds themselves. This cross-industry depth means the team brings genuine domain expertise to every client engagement, not just platform knowledge. Increasingly, that expertise is amplified by AI that is embedded in the platform and deployed directly in daily operations.
Ian McDonald, Clearwater’s Head of Product for Managed Services was moderator on the day. Ian has 16 years of middle and back-office operations experience, spanning JPMorgan, SEI Investments, and Enfusion, where he was originally hired to build out EMEA MBO operations from Dublin, Ireland. He currently is a Product Management executive and leads the end-to-end Managed Services Product offering.
Clearwater Analytics provides investment accounting, analytics, and reporting solutions to the world’s most sophisticated investors. Through Enfusion, Clearwater delivers integrated managed services — spanning middle office, back office, and reconciliation — on a single cloud-native platform, supported by a team of 200+ specialists with deep buy-side and sell-side domain expertise.