For CFOs and fund managers, back-office efficiency and compliance are crucial. For investors, transparency and consistency in investor relations is paramount. An outsourced fund administration provider must serve both these constituencies with a technological capability and experience in accomplishing both at once. Regulatory scrutiny of management and investor sophistication are both greater than ever, and effective administration has come to mean a level of service and depth of reporting, for both management and investors, that many outsourced providers find challenging.

Investor Expectations

Retail investors expect prompt production of investor relations deliverables, regular reliable updates and around-the-clock accessibility of position, history and tax information. Institutional investors expect outsized reporting, Institutional Limited Partner Association (ILPA) compliant reporting that is comprehensive, tailored and delivered more frequently than ever before. Institutional investor relations means reporting on a level and at a scale that requires sophisticated and specialized technology.

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A major reason fund managers outsource investor relations or switch from one investor relations firm to another is dissatisfaction with the quality of service. When evaluating a fund administrator or fund accountant or any third-party that will perform any investor relations function it is important to understand the firm’s history, technological capability and its commitment to customer service.

Integrated Investor Relations

Any provider of investor relations services should work well in coordination with your internal staff as a partner. They should be aware of your output requirements, your scheduling and your work-flow to provide the kind of investor relations that seamlessly magnifies your efforts. The firm should be experienced working with organizations, structures, strategies and reporting requirements similar to your own.

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Many fund administrators have set processes and parameters for investor relations services and are unable or unwilling to customize according to client preferences. While it is easier for administrators to standardize investor relations and make clients conform to their procedures, it is far better for your work efficiency and the reputation of your brand for investor relations to be customized to your needs. A boutique service provider is often superior to the very large well-known names in fund administration. A smaller organization can offer a higher degree of customization, more direct access to senior-level knowledge and a dedicated account manager who is supported by a larger team.

Outsourced investor relations should be as much like working with your own employees as possible. Regular meetings and status calls with your investor relations team should be available so your internal team is used to working personally with your outsourced team. Regardless of the size of your administration partner, a full range of services should be available including investor relations, fund accounting, financial reporting, tax document services and web portal account access for investors and their financial advisors.


An assurance of competence and sophistication in fund administration and investor relations is the SSAE 19 System and Organization Controls (SOC) 1, Type 2 audit. The SOC 1 Type 2 audit consists of a thorough investigation of the processes, systems and internal controls of administration and investor relations processes. The audit looks at the administrator’s human and automated business procedures, associated accounting data, the financial reporting procedures used to create financial statements and the company’s IT systems. An investor relations services provider that has undergone this audit annually has demonstrated efficient an documented processes often required as part of the due diligence process of institutional investors and others.

Cost Considerations for Investor Relations

Over a third of private equity managers say that they are increasing their reliance on outsourcing to control operational costs and professionalize the non-core functions of the management company. Fund administration and investor relations is a natural operational sector to outsource. Fund accounting, financial reporting and investor relations are subject to increasing regulations and investor expectations.

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The greater complexity of meeting these new demands represents an operational risk best addressed by specialized professionals. The costs and complexities of employing, training and maintaining an internal staff for administration and investor relations represent an ongoing distraction of management from core functions.

Additionally, the variable hourly demands of asset accounting, financial reporting and investor relations means cycles of overstaffing and understaffing with internal staff while outsourced investor relations is priced according to time and effort. Distribution months and tax season will be more expensive while periods of lower operational demand will cost less. Outsourced investor relations also obviates concerns related to wage inflation and key-person risk.

Any consideration of cost with regard to fund administration and investor relations must include the cost of changing service providers if you are dissatisfied with service levels. While launching a fund with an administration partner is relatively affordable, switching from one investor relations provider to another is not. Data conversion from one provider’s systems to another is a long and costly process and can be very disruptive to management. Getting the decision on fund administration and investor relations right the first time is key.

Finally, in comparing costs among service providers, it is important to investigate the overall cost of the specific package of services you will need. Investor relations services are usually priced as a function of investor count. Fund accounting according to asset under management. However, there is typically a monthly standard minimum fee, a basic subscription cost to which ancillary fees are added. This basic monthly fee may vary widely from provider to provider. It is important not to compare providers based solely on this fee.

Investor relations involves periodic costs: capital calls, distributions and tax services to name a few. Fund accounting involves periodic reporting, audit support and regulatory filing. These will be billed separately in addition to the basic fee. A provider of fund administration and investor relations with a low basic subscription fee may actually be more costly to work with depending on how the ancillary fees are priced. Only an overall estimate of likely costs on a monthly – basis based on a fund’s actual use of services – will produce a useful cost comparison among fund administration/investor relations providers. Value in outsourced fund services derives from pricing based on the time and effort necessary to get each job done.

Cost management is a major strategic concern for private equity and venture capital funds but cost-effective value in outsourced investor relations could not be more important. Current investors are the most fertile source of new investment capital for an alternative investment fund. Aside from investment return, every aspect of a fund’s reputation in the eyes of investors will be represented by the outsourced investor relations partner.