While there are many ways an outsourced transfer agent saves you money, there are four ways the right transfer agent provider can actually make you money. Obviously, as an agnostic third-party provider of back-office services, your transfer agent partner is not in a position to introduce capital, refer potential investors or in any way promote your investment product. However, if your transfer agent is deeply experienced, uniquely equipped and genuinely aligned with your interests as a fund manager, there are four ways your transfer agent can significantly enhance your ability to raise new funds.
So, where does your new capital come from and how can your transfer agent help?
- Your Current Investors
The most likely investors in your next fund are your existing investors. You have already cultivated a relationship with them, familiarized them with the way that you do business and given them the benefit of your management skills with healthy returns on investment. But what day-to-day investor experience has your transfer agent solution provided?
- Do their tax documents arrive on time?
- Are the statements and reporting they receive clear and easy to understand?
- Have their questions been answered in a prompt and helpful way?
- Do they have web portal access to their account information that meets their needs, provides needful things like statements and tax documents and allows them to communicate easily with management.
The return on their investment dollar aside, what is the general feeling your investors have about being an investor in your fund? That feeling is largely the result of the performance of your transfer agent. If the general feeling is unsettled in any way your investors, in conversation with their financial advisors, may decide to diversify away from your offerings to something that promises a similar return.
A transfer agent provider that is actively concerned with your reputation in the eyes of your investors will provide consistently clear, accurate and complete information, respond promptly to inquiries and deliver on-time reporting and tax documents. This consistency enhances investors’ sense of stability and satisfaction with their investment decision and will increase the likelihood of their repeated investment in your future funds.
- New Investors
Sourcing new investors for your fund takes insight. Insight comes from actionable data. Actionable data should be coming from your transfer agent’s investor record keeping system. However, this is rarely the case. Few transfer agents use systems capable of robust sales and marketing reporting.
Transfer agents use ‘investor record-keeping’ or ‘transfer agent’ systems to manage the investor database for their clients. There is no standard record keeping system for the alternative investment industry. To manage the back-office tasks of fund sponsors, transfer agents have developed or adapted systems in various ways. Some are modified versions of systems designed for publicly-traded funds which have a very different set of transfer agent needs. Some are multiple systems cobbled together to capture the capabilities necessary for all transfer agent functions. Some are no more than amplified CRM systems. A very few are designed from the ground up as transfer agent systems specialized for alternative investment funds. Fewer still feature a sales reporting module with the ability to leverage investor, advisor, sales and transaction data to equip the fund sponsor’s sales team with actionable data to drive new sales.
The ability for your transfer agent system to draw insights from the sales success you have already achieved gives your sales team the ability to source new investors by pursuing the most fertile ground. Who are your best performing financial advisors? Who are your most reliable repeat investors? In what regions do you do best? What is your key investor demographic? Who should really get a Christmas basket this year? Essential sales intelligence that will enable you to raise more capital is in your investor database. But only the robust reporting capability of an advanced transfer agent system can make it useful.
- Financial Advisors
A transfer agent’s reputation among financial advisors is also a positive factor for sales. Advisors want a smooth experience with a sponsor’s transfer agent with minimal errors and delays and a maximum of efficient data flow and responsiveness – resulting in an accelerated admit date. The connectivity of the transfer agent system is a significant factor as well. A transfer agent system should have live digital connections to the many key participants in the industry: broker-dealers, RIAs, wire houses, custodians, family offices, FANMail, the AIP platform, etc.
Data uniformity and instant data transmission to and from the transfer agent simplifies everything for financial advisors and eliminates stressful delays and uncertainty. In the event of an interaction by phone being necessary, a responsive, well-informed transfer agent that is able to clarify situations and resolve issues efficiently makes a favorable impression. Advisors like working with that transfer agent and, by extension, its client sponsors. This cannot help but have a positive effect on sales.
- Institutional Investors
The largest investors of all, pension funds, endowments and family offices look for a high quality outsourced transfer agent as part of their due diligence process for prospect funds. In the eyes of many institutions, fund sponsors who perform their own transfer agent processes are assuming an unacceptable operational risk.
Also, many institutional investors belong to an industry trade group called the Institutional Limited Partners Association (ILPA). Because institutions demand maximum visibility on behalf of their stakeholders, ILPA recommends its members require financial reporting from their portfolio investment funds that adheres to the ‘ILPA Reporting Template’. This is a vast, exhaustive reporting package that goes into granular detail on portfolio performance, compensation rates, expenses, depreciations and every possible line item and metric of the fund. It also must include detailed reporting on the fund’s adherence to any and all limitations on portfolio investments to which the institutional is subject.
Production of the ILPA template is system-intensive and time-consuming, even for the transfer agent providers with a fund accounting group that is capable of producing it. It is well beyond the capability of most fund accounting teams. If you want institutional investors, you will need institutional-class transfer agent with a fund accounting team familiar with and capable of producing the ILPA template. A transfer agent provider with the reporting capacity that qualifies your fund for institutional money represents a significant advantage in fund raising.
Your investors chose your fund offering primarily for the return on investment (ROI) that you provide as an investment manager. In choosing an outsourced transfer agent partner, you have the right to expect a return on your transfer agent investment with real benefits to the bottom line.