Transfer Agent for Private Equity and Venture Capital – A Valuable Back-Office Ally

Failure to perform transfer agent processes professionally can make the difference between large number of investor referrals and being unable to raise sufficient funds.


Transfer Agent for Private Equity and Venture Capital – A Valuable Back-Office Ally

Emerging private equity and venture capital managers have the wind at their backs. Private equity and venture capital have exploded in popularity and the alternative investment sector as a whole is drawing in more money than ever before. The back-office needs of more offerings are being met by third-party transfer agent providers than ever before. As a consequence, there are more new transfer agents entering the industry than ever before. The best transfer agent firms have a long track record of outstanding performance, stringent regulatory compliance procedures and a dedication to transparency and customer service.

Most investors now regard emerging managers, spin-offs, and first-time funds to be credible possibilities for their portfolios. Previously, these managers were perceived as too risky for conservative investors. Those perceptions have changed but outsourced transfer agent services are considered a key bona fide for serious emerging fund managers. To take advantage of the vital opportunity of investor demand, emerging managers must demonstrate that they not only have a compelling investing thesis but also the transfer agent and administration infrastructure to back it up.

What Investors Expect from Transfer Agent Services

Investors perform extensive due diligence on all aspects of an investment firm’s activities. The importance of the transfer agent has gone to the top of their to-do list. For today’s investors, how the fund is managed, how its performance is reported to investors and how compliance is achieved are all critical factors. Failure to conduct proper professional transfer agent processes can make the difference between receiving a large number of investor recommendations and being unable to raise sufficient funds.

To spin out from a firm and raise cash for a new fund takes a lot of effort. Taking on transfer agent and other back-office processes is not required as part of this lift. Emerging managers must understand investor, auditor and regulatory expectations, be realistic about the requirements and determine which duties to assign to service providers such as transfer agents. Many new fund managers choose to outsource transfer agent functions so that they can focus on their core competencies: raising capital, acquiring assets and producing superior returns for their investors. After all, transfer agent tasks are a time-consuming, complex set of processes that are extensively regulated and fraught with specialized requirements and operational pitfalls. Many transfer agent service demands are too costly and perceived as potentially risky to be handled by an in-house transfer agent team:

  • Reporting accuracy
  • NAV calculation accuracy
  • Data security and availability
  • Timeliness of deliverables
  • Processing integrity
  • Interaction with wire houses, financial advisors, custodians and others
  • Confidentiality
  • Privacy practices
  • Disaster recovery preparedness
  • Business resumption strategy
  • Data redundancy / Offsite backup

All of these functions and service capabilities come standard with a transfer agent provider and at a fraction of the cost of employing and training in-house transfer agent staff. Full-service transfer agent firms provide additional operational services such as fund accounting, reporting and investor services, allowing you to outsource almost all back-office chores.

Purpose-Built Transfer Agent Systems

Back-office processing without specialized transfer agent software is a significant operational risk. Technology systems created exclusively for private equity transfer agent functions are used by third-party transfer agent firms to process investor and transaction data and partnership transactions, track investor activity and investor capital accounts. A specialized system increases the speed and accuracy of all transfer agent functions particularly when funds reach a certain scale. A transfer agent system integrated with fund accounting software is able to draw data directly from the general ledger and reporting output to service the needs of investors, management, auditors and other outside entities.

The transfer agent system provides investors with needed information through an integrated web portal where they or their financial advisors may obtain reports, papers, statements, tax forms and notifications as well as communicate, queries and requests to management. Transfer agents can also provide CFO portals and file transfer protocol (FTP) connections to streamline duties within the transfer agent team as well as electronic subscription integrations and data rooms to streamline the new investment process. A transfer agent partner will have its own IT team that manages, maintains and enhances the transfer agent technology as needed to assist management and investors in all of their needs. The economies of scale and concentration of industry operational knowledge transfer agents offer make outsourcing transfer agent functions a smart business decision for investment funds.

Customer-Focused Transfer Agent Services

Transfer agent businesses that are advanced and successful pride themselves on providing high-touch customer service. The transfer agent’s average client tenure reflects the transfer agent’s commitment to customer satisfaction. A competent transfer agent firm will have a diverse range of asset class experience as well as client account managers with extensive experience with a variety of fund structures and complexity levels. Real estate funds, debt funds, small business investment companies (SBIC) funds, buyout funds, venture capital, oil and gas partnerships and funds of funds all have different transfer agent process demands. Transfer agent firms with a variety of fund types can share the operational efficiencies, reporting solutions and compliance procedures developed over time with their other transfer agent clients giving all clients the benefit of their experience.

Client interactions with their transfer agent partner should be handled by a familiar account service team that is well-versed in the client’s assets and can anticipate client demands on a daily basis. Working with a high-quality, service-oriented transfer agent service provider should feel as if you’re working with a hand-picked in-house transfer agent team.

The Transfer Agent Firm's Reputation

For managers considering a transfer agent partner, the transfer agent firm should have current clients who are willing to provide references attesting to the transfer agent provider’s expertise and reliability. The level of morale and cohesion inside a transfer agent firm is apparent in the internal rate of service employee turnover. The reputation of a transfer agent firm among financial advisors, custodians, wire houses, and other industry participants is also crucial.

Transfer Agent Services Can Be Customized

A transfer agent provider should be able to accommodate a new client’s individual transfer agent and administration needs based on an evaluation of the conditions of the client limited partnership agreement (LPA) or private placement memorandum (PPM). Transfer agent software and services should be adaptable enough to suit those requirements while also complementing the client’s preferred workflow. A transfer agent partner should customize reporting, statements, checks, the investor web portal and other industry and investor-facing deliverables to support the client’s brand.


Fund Accounting, capital calls, proxies, financial and sales reporting, investor services and tax document generation for client companies are just a few of the key back-office services that the best transfer agent firms should be able to perform. Anti-money laundering (AML), Know Your Customer (KYC), Office of Foreign Assets Control (OFAC), Foreign Account Tax Compliance Act (FATCA) and other government screening requirements should all be easily met by any transfer agent firm.

If a transfer agent firm offers fund accounting as part of a bundled suite of services, the fund accounting team should be familiar with the Institutional Limited Partner Association (ILPA) reporting standard and be capable of developing institutional investor reporting that follows it. This is a large and comprehensive reporting package that many transfer agent fund accounting groups lack the knowledge or system capacity to produce.

Expertise in the Transfer Agent Field

A transfer agent firm should be knowledgeable with all forms of private capital fund structures, onshore and offshore transfer agent requirements as well as needed interaction and coordination with outside industry bodies and client vendors. A consultative transfer agent firm will be able to recommend high quality vendors and suppliers and assist in establishing effective and efficient vendor alignment.

You may learn a lot about efficient operations and avoid a lot of blunders by working with a third-party transfer agent firm. Professional transfer agents can help clients create crucial efficiencies, control costs and improve the performance of managers by allowing them to focus on what they do best.

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