You’ve already made a significant step toward a productive and compliant back office for your fund by choosing to work with a fund accounting firm. Fund managers can concentrate on sourcing and acquiring assets and providing investors maximum value if fund accounting, financial reporting and back-office infrastructure are in place and not a distraction. It is a smart business decision to outsource fund accounting but one that should be made with care.

There are several the key characteristics to look for in a fund accounting company. Among the most important questions you should ask regarding their offerings is about their history and experience.

History and Professional Experience


A firm with extensive knowledge of private equity, venture capital and other alternative investment funds should be your first choice. Their principal experience and top priority should be fund accounting for alternative investments. Different accounting firms have vastly different levels of the experience you are looking for. Companies from a variety of industries move into third-party fund accounting. Companies in very different fields offer fund accounting as an ancillary service, then market it as a stand-alone offering. They are not necessarily experienced with the ecosystem and intricacies of fund accounting for a private equity or venture capital funds.

Beware of Big Brands

Do not be impressed by a firm’s flagship clients. Experience with general accounting for well-known brands or large organizations is not the same as fund accounting for alternative investment funds. It is a mistake to presume that a firm is familiar with your needs just because their name is familiar or their clients’ brands are well-known. It is also a mistake to assume that even if a firm has large well-known private equity clients that you will receive the same level of service that they do.

Acquisition and Transition

Your fund accounting partner should also not have recently been involved in a merger or the purchase of another firm. Fund accounting is a complex team-oriented activity easily disrupted by acquisition and transition activity. An acquisition can mean months or years of conversion from one set of systems and procedures to another for both of the firms involved. Service levels are notoriously effected by acquisitions among fund accounting firms

Questions and Answers

To learn more about a firm’s past and experience, you should ask the following:

  • Are you primarily engaged in fund accounting or general accounting?
  • How long have you worked with private investment funds?
  • Did you originate in private equity and venture capital fund accounting?
  • Have you dealt with a variety of fund types and asset classes?
  • Do you have experience with institutional and retail investors?
  • Has your business recently merged with or acquired another business?
  • Can you advise me on how to select the appropriate fund accounting strategy for my funds?

Background is Crucial

Alternative investments are a unique industry with a unique set of requirements and participants. There isn’t a lot of uniformity and standardization so industry knowledge and experience are essential. In the area of fund accounting firms, a history of navigating these waters successfully on behalf of a variety of funds is an essential qualification.

In Part 2 of Sizing Up a Fund Accounting Firm, we will look at The Breadth of Services offered.