What is Fund administration services
Investment managers’ core function is to generate alpha for investors by way of focusing on their investment strategy. At the same time, non-core functions like middle and back-office activities contribute heavily to generate alpha.
Many investment managers in-house team or outsource these functions to a professional service provider like Fund Administrators. Fund administration services include fund accounting, investor reporting, financial reporting, regulatory reporting, treasury, depositary services, and other administration services.
Usually, Fund Administrators build their expertise and solutions based on the asset class of investment managers like Real Estate, Hedge Fund, Private Equity Funds, Digital Asset Funds, etc. Fund Administrator also plays a vital role from due diligence standpoint wherein investors could rely on accurate and timely data to better understand the performance of investment manager.
Fund Administrators do provide value additions to managers with the help of scalable infrastructure; which at the same time would be very unproductive and costly for the manager to maintain. Applications like Portfolio Management Systems, Reporting Tools, Order Management Systems, etc are maintained by Fund Administrators to provide services based on manager service’s scope.
Reference: https://www.fundtec.in/fund-administration-services
The Main Advantages Of Fund Administration Outsourcing
Managers can benefit much from outsourcing to an independent fund administrator, from more adaptable, scalable operations to completing due diligence criteria and realising significant cost savings. Here are some major advantages and other things to think about as outsourcing is fundamentally different from doing everything in-house.
Efficiency and transparency
Do you believe concentrating all administrative tasks under one roof will reduce your risk? Most likely, your investors disagree with you. Most investors want independent, third-party administrators as part of their operational due diligence (ODD). In fact, choosing a fund administrator may be a deal-breaker when soliciting investors for a new fund, particularly those situated in Europe. You can concentrate on investing and generating profits for your fund by outsourcing the accounting books and records because it frees up your time.
Technology
Are you still handling everything with spreadsheets or generic accounting platforms, or are your software solutions keeping up with the growth and structural complexity of your funds? Outsourced providers continuously keep an eye on trends and make investments in the newest software, all-in-one general ledger and allocation solutions like Investran, and investor portals like Investment Café. This guarantees that your fund is managed using modern, developed technologies specifically for private fund accounting.
Cost
An internal administrative team is a cost to the company. However, when it is outsourced, the expense for the fund is quite little, predictable, and fair. As a result, your company will experience significant cost reductions and be able to reassure limited partners.
Scalability
Your company will need more operational, accounting, and investor services people as it adds new funds, co-investments, and other organisations. It's true that hiring and managing employees is a constant distraction. With an outsourced approach, adding new funds or companies is as easy as giving your administrator a call. You are transforming the infrastructure and employee fixed expenses to an administrator variable cost.
Other things to think about
You may concentrate on your investments by outsourcing your fund administration because it offers a number of advantages. To ensure compatibility, consideration should be given to workflows, regular communication, final decision-making, and onboarding when choosing the best provider.