How to Evaluate a Fund Administration Partner

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How to Evaluate a Fund Administration Partner

Important consideration in choosing a fund administration provider for alternative investment funds

Fund Administration Firms – Questions to ask about their services and capabilities

You have decided to partner with a fund administration provider. You’ve taken an important step in establishing an efficient and scalable investment fund. Choosing the right provider is key and in Part 1 of the buyer’s guide you have considered the experience, breadth of the service offering and flexibility of services of the fund administration firm.

Here are some more of the most important qualities to consider when evaluating a fund administration provider and the questions you should ask about their capabilities.

System Sophistication and Technical Know-How

Your fund administration partner’s systems should maximize back-office efficiency and provide reporting that makes your life easier. Fund administration systems should be high-quality and flexible to meet your business needs.

If special programing, enhancements or custom system features are needed to accommodate your fund, you want your fund administration partner to have the ability and inclination to provide them.

What to ask about fund administration system sophistication and technical know-how:

  • Can you customize your fund administration systems for my asset type and business requirements?
  • Can your systems take uploads from other systems or service providers?
  • Is your fund administration system connected to wire houses, broker-dealers, RIAs, the AIP platform, DST FAN Mail, custodians and family offices?
  • What kind of sales and transaction reporting can I get to help my sales teams?
  • Can your fund administration system provide financial reports customized for GAAP accounting, auditors, deal teams and fund management?
  • Can your fund administration system produce the ILPA reporting template for my institutional investors?

Why Technology Matters:

  • Advanced fund administration systems save costs by shortening execution times and minimizing errors.
  • Custom reporting from your fund administration data makes you better able to manage your fund.
  • Sales and transaction reporting makes you better able to bring in new investments.
  • A fund administration system’s data connections to industry entities simplify and speed execution of transactions.
  • System efficiency supports your brand’s reputation among advisors and investors.

Controls, approval stages and audit trails in the fund administration system promote efficiency and simplify audits.

How your fund administration partner treats you, the client, is paramount. You should not have to wait in phone queues when you call, leave voicemails or deal with different departments of a fund administration firm.

Focus on Customer Service

How your investors are treated by fund administration is essential to your reputation and to follow-on investments. Serving and representing you should be top-of-mind for your administration partner.

What to ask about a fund administration firm’s commitment to customer service:

  • How will my account team be organized and when will they be available?
  • Who will I be interacting with on a daily basis? Will there be back-up?
  • How experienced are your fund administration teams?
  • What is the turnover rate among your client service personnel?
  • Will the person I talk to understand my fund and how we do things?
  • How will my investors and their advisors be treated when they contact fund administration?
  • Is any of your phone support team outsourced?
  • How do you measure client service?
  • Do you track your Net Promoter Score? If so, what is your score?

Why Customer Service Matters:

  • Your fund administration account team should act as much like your own employees as possible, responsive, knowledgeable and familiar with your needs.
  • Fund administration is there to save you time and prevent back-office distractions.
  • The treatment your investors and their financial advisors receive from your fund administration partner represents your brand and makes an impression.

The cost of fund administration services should not be the main driver of your decision, but it is an important factor.

Value Pricing

Very low prices may be an indicator of outsourcing, inferior service levels or the attempt of a small under-equipped fund administration provider to gain market share. Very high prices may only reflect the brand prestige of a well-known fund administration provider and not represent value to you.

Value pricing in fund administration represents a clear correlation between charges and the time and effort required to perform administrative tasks well.

What to ask about fund administration pricing:

  • How do you price your fund administration services?
  • Is your pricing tied to a percentage of AUM or based on time and effort?
  • Can you customize pricing for specific fund administration services or is everything included in a base fee?
  • How does your pricing change as my fund grows or as I add new funds?
  • Is your pricing structure transparent and easy to understand?

Why Pricing Matters:

  • You want your fund administration costs to be money well spent on behalf of your investors.
  • Poor service and frequent mistakes are costs you do not want to pay because you chose a bargain administration firm.
  • Big name fund administration firms, with big name clients, may not provide the same quality of service to their smaller fund administration clients. You don’t always get what you pay for.
  • The relationship you have with your fund administration partner should be based on more than just the bill.

An Important Decision

Your fund administration team should be your operational partner, the people you would hire if you were building an in-house team. The answers to these questions will give you a good idea of whether a provider is qualified, equipped and inclined to be the partner you need.

Outsourcing fund administration is a smart business decision and an efficient division of labor but only if both parties are capable and in sync. The answers to the above questions should give you a good perspective on whether a fund administration firm will be an effective operational partner for you.


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