A Reputation for Fund Administration
The dreary but necessary set of back-office processes that make up fund administration are not usually thought of in terms of your reputation as a fund sponsor.
Normally, the words associated with a sponsor’s fund administration core are hardworking, diligent, timely and compliant.
But the world of private funds has changed over the last twenty years and so has fund administration. Institutional investors, high-net-worth individuals and regulators have become more alert and aware of the operational risks than ever before. Fund administration is more and more considered a prerequisite for private funds. Even retail investors, with more options than ever in the alternative investment space, are sensitive to failures and missteps on the fund administration side and take them as a sign of a fund sponsor’s general competence.
The accounting, reporting, investor relations and processing duties of fund administration teams are increasingly in the spotlight. Inadequate fund administration, whether performed by an in-house team or by a third-party fund administration provider, carries serious financial, regulatory and reputational risks to fund sponsors. They must protect themselves from operational risk with a deliberate fund administration due diligence process.
Fund administration that can deliver high levels of efficiency, transparency and responsiveness provide a major competitive advantage in terms of risk. At a time when investor capital is difficult to come by fund administration that can effectively carry out its obligations and exceeds investor expectations allows the sponsor to attract more capital.
The most precious assets of an investment firm are its people and its reputation. Fund administration that complements the acumen of the investment and management teams with back-office precision, reliability and responsiveness enhances the reputation of the fund sponsor and contributes substantially to the success of its funds over time.
The Growing Imperative of Third-Party Fund Administration
The fund administration provider is at the center of this architecture. The ability and willingness of the fund administration firm to transmit data, meet reporting requirements and communicate effectively with these entities is important to establish from the beginning. The proper alignment of vendors puts the fund administration provider at the center of a well-oiled machine able to support investors, management, financial advisors and all parties in a way that communicates the over-all professionalism of the fund sponsor.