Fund Management and Fund Administration

Innovative approach to fund administration and representing the priorities of fund administration in the major trade associations in the industry.


Fund Management and Fund Administration

Managing an investment fund, in addition to generating investor funds and making portfolio investments, entails a variety of back-end fund administration duties. Some fund managers handle these activities with an in-house team, but more and more are outsourcing to third-party fund administration providers. Phoenix American is a renowned fund administration provider for the alternative investment fund sector, with nearly fifty years of experience.

The Role of Fund Administrator and Benefits of Outsourcing

The outsourcing of support tasks such as portfolio accounting, reporting, as well as the management of the investor roster, is known as fund administration. Examples of fund administration services may include: 

  • accounting
  • investor servicing and reporting
  • financial and statutory reporting
  • treasury and depositary services
  • corporate secretarial services

Fund administration firms may specialize in particular investment categories, such as:

  • real estate
  • infrastructure
  • private equity
  • hedge funds

Phoenix American fund administration services are available for all alternative fund structures and portfolio asset classes. A fund administration provider performs middle-office and back-office fund administration support to allow the investment manager to focus on value-add functions.

Outsourcing fund administration work has a number of advantages. To begin with, fund administration allows the investment manager to concentrate on their core activities of developing new funds, sourcing investors, investing in assets and managing those assets on behalf of the investors, in order to generate income and value. The second is the ability for fund administration to provide scalability for managers so that they do not have to worry about the distractions of in-house fund administration employees as their funds grow. Third, fund administration allows the manager to take use of the fund administration provider’s technology investment. Rather than investing in accounting, recordkeeping, and reporting systems, many investment managers will prefer to invest in analytical systems and data warehouses. Fund administration can assists in gathering, creating, and synthesizing data for use in these systems.

Many private equity funds have traditionally been supported by fund administration through an outsource arrangement. Traditionally, real estate investment managers kept fund accounting in-house; however, due to increased complexity in fund structures, rising technology costs, a scarcity of experienced fund administration personnel, and, in some cases, investor demand, outsourcing fund administration in the real estate industry has been on the rise in recent years. The emergence of tax-driven feeder funds, Luxembourg entities, REIT structures, and other intricate fund structures, as well as extensive investor reporting requirements like ILPA, has increased the demand for subject matter specialists at fund administration firms.

Investor Benefit and Important Factors to Consider in Choosing Fund Administration

Investors, particularly sophisticated investors, are increasingly demanding the services of a fund administration to support the funds in which they invest. Investors believe that fund administration adds an extra layer of review and independence because the fund administration provider has strong controls and typically undergoes a SOC 1 operational audit. Another observation is that fund administration contributes to a more efficient and cost-effective model for the fund they have invested in.

Managers choosing a fund administration provider should weigh the breadth and depth of services they require against what is available. A fund administration firm with a broad service offering, for example, can provide a diverse set of solutions. Managers should also consider the future fund administration needs of the fund as it succeeds and grows and whether a fund administration firm under consideration can deliver relevant services. They should also assess the fund structures (open end, closed end, independently managed accounts) and investment type (real estate, infrastructure, debt, private equity) of the funds with which the fund administration firm has worked. Their is also the relationship model. If a fund needs a variety of services from outsourced fund administration, there should be a single point of contact or relationship manager. A good outsourced fund administration arrangement will operate as an extension of management, looking for ways to add value while continuing to support business as usual. Client interactions should be viewed as business partnerships by the right fund administration firm, which provides full business solutions to customers and looks to add value to their business operations.

A fund administration relationship should be as much as possible like working with employees that management has qualified and hired for an in-house operations team. This is the philosophy of Phoenix American fund administration services and the goal to which we strive every day with every client. 

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