The Transfer Agent That’s Right For You

Fund managers can effectively focus their efforts on raising capital, acquiring assets and managing portfolios for their investors if they have the right transfer agent partner.


The Transfer Agent That’s Right For You

A guide to evaluating transfer agent service providers for alternative investment funds

Your investment fund has taken an important step by opting to work with a transfer agent. It is a sound business decision to outsource transfer agent services, fund accounting, investor services and other back-office tasks so fund management can focus on sales and assets. But this move should be made with prudence.

The importance of selecting the right transfer agent provider cannot be overstated. Below are the most crucial characteristics to look for in a transfer agent company as well as the questions you should ask about their firm and their services.

Fund managers can effectively focus their efforts on sourcing investors and acquiring assets that will yield the most value if they have the right transfer agent on board.

History and Experience of the Transfer Agent Firm

Some transfer agents have much better experience than others. Companies from a variety of business sectors sometimes try to take on the role of transfer agent. In addition to their principal services, which may be based in other industries, some businesses provide transfer agent services as a way to leverage marginally relevant capabilities. Look for a transfer agent with extensive experience as a transfer agent specifically with alternative investment funds. It ought to be their first priority as a firm. In mutual funds and ETFs, a transfer agent’s role differs significantly from that of an alternative investment transfer agent. It’s a common misconception that just because a transfer agent’s name is associated with publicly listed funds, they’re also familiar with and able to provide private fund transfer agent services. Additionally, because a transfer agent is a challenging team-oriented position, you should make sure the transfer agent firm you are considering has not recently been involved in a merger or acquisition.

The experience and background of a transfer agent matters. Questions to ask:

  • Have you been a transfer agent for a long time?
  • Did you start out as a transfer agent for alternatives?
  • Have you worked with a variety of asset classes and types of funds?
  • Do you work mostly as a transfer agent for publicly traded funds?
  • Have any mergers or acquisitions occurred in the last few years?
  • Could you tell me how you are the most appropriate transfer agent for my funds?
  • Are you a transfer agent registered with the Securities and Exchange Commission (SEC)?
  • Has a SOC 1, Type II audit been performed on your transfer agent process controls?

A transfer agent’s background and experience matter. Here’s why:

  • Alternative investments are a unique ecosystem that necessitates specific transfer agent expertise. There isn’t a lot of standardization in back-office services for alternatives. In the area of transfer agent services, experience counts for a lot.
  • The role of alternative investment transfer agent is one-of-a-kind and challenging.
  • Transfer agents work with broker-dealers, RIAs, wire houses, clearing firms, custodians, data aggregators and other industry participants on a day-to-day basis. It takes time for a transfer agent to get to know the players and how they interact.
  • Your transfer agent partner should be able to advise you on back-office best practices for your specific fund type based on their experience.
  • Transfer agent companies that have been bought or are in the process of being bought can spend years adjusting to new systems, organizational structures and corporate cultures. During the transfer agent’s transition, client service suffers.

Additional Back-Office Services Integrated with Transfer Agent Services

All of your vital investor information will be housed in your transfer agent’s systems. Being able to integrate additional back-office services with that single service provider might be really beneficial. Compliance, security, data uniformity and timeliness of deliveries can all be aided by a transfer agent firm that can manage all fund data and back-office activities. Service integration will also control overall costs. Is the transfer agent capable of providing a comprehensive set of back-office services? Even if your present transfer agent requirements are minor, now is the time to consider how those requirements may evolve as your strategies and ambitions evolve.

Back-office services integrated with transfer agent services matter. Questions to ask:

  • In addition to transfer agent services, do you offer fund accounting, investor services, cash management, tax services, check and statement printing and fulfillment services?
  • Do you have a web portal where investors and financial advisors can go to get essential account information?
  • Are you able to communicate with investors via mail, email, phone, and the internet?
  • Do you manage capital calls and proxy voting?
  • Do you print checks, statements, notifications and other documents?
  • Can you produce investor 1099 and K-1 tax forms?
  • Do you have any banking, valuation, auditing or other service referral partners?

A transfer agent’s back-office service capability matters. Here’s why:

  • The more third-party service providers you have in addition to your transfer agent, the more potential for communication problems, misunderstandings and delays you’ll have.
  • Combining transfer agent and other services with a single partner can save you a lot of money.
  • Data security is jeopardized by frequent exchange of sensitive data among numerous service providers beyond your transfer agent.
  • Managing a single full-service transfer agent relationship for all back-office tasks is far less complex than coordinating the work of multiple vendors.

The Ability of the Transfer Agent to Customize Services

Your transfer agent needs to be able to set up your account and deliver services that accommodate your needs, workflow and business plan. The structure, asset classes, fundraising strategy and operational procedures of your fund are all distinct. It’s critical to have a transfer agent solution that’s matched to your specific requirements. You shouldn’t have to work around the transfer agent’s schedule and preferred way of doing business.

The flexibility of a transfer agent’s services. Questions to ask:

  • Will you be able to set up my fund to meet all of the requirements of my fund formation document (PPM/LPA/LLC)?
  • Would you be willing to collaborate with me and/or other parties to find solutions to specific transfer agent issues?
  • Are you able to personalize my investor statements?
  • Are you able to brand my investor web portal to match my website?
  • Can the reporting output be customized for different audiences?
  • Is your fund accounting team capable of handling a complicated waterfall?
  • Can you adapt your transfer agent solutions to changes in our strategy, structure or investor type as they arise?

Flexibility in transfer agent services matters. Here’s why:

  • Your transfer agent partner’s job is to relieve you of back-office stress, not to force you to follow their rules.
  • In a variety of ways, your transfer agent’s service and output represent your brand to investors, advisors and others. You should have complete control over the image of your fund.
  • Your transfer agent processes must follow your fund creation document’s unusual or complex characteristics, even if they are uncommon or complex.
  • As your investing strategies, asset classes or investor types change, you may need different forms of transfer agent support. Is your transfer agent capable of handling any future funds you decide to launch?

A Crucial Collaboration

You would hire folks who possessed all of the characteristics of a top-tier transfer agent provider if you were developing an in-house transfer agent team. The answers to these questions will help you determine out if a transfer agent provider is competent, ready and willing to be an effective back-office partner.

In assessing your options in transfer agent support for your fund, Part 2 of the transfer agent buyer’s guide has more questions for you to consider.

Learn why industry leaders trust us for their back office

Let’s discuss how Phoenix can elevate your investor experience