Transfer Agent Services That Profit Your Fund

Where does an alternative investment fund get new investment capital? And how might a transfer agent help to get more?


Transfer Agent Services That Profit Your Fund

We’ve already talked about how using a transfer agent can you save money in a variety of ways. But it gets even better. A top-tier transfer agent organization can greatly improve fund management’s potential to make money in a variety of ways. As a neutral third-party provider of back-office services, your transfer agent partner is obviously unable to introduce capital, suggest new investors or promote your investment product in any way.

Still, there are a number of ways your transfer agent infrastructure can significantly increase your ability to generate new capital if your transfer agent provider has significant experience, is well-equipped and is truly aligned with your goals.

So, where do you get your investment capital, and how might a transfer agent help you get more?

1. Existing Investors - The Transfer Agent and Daily Experience of the Investor

Unless they experienced a bad back-office experience from the transfer agent, existing investors are the most likely to invest in a sponsor’s next fund. By acquainting them with your company’s investment strategies and providing them with the benefits of your knowledge in the form of positive returns on investment, you have established a rapport with these investors. However, a transfer agent’s services are an important component of the investor experience. On a daily basis, how has the transfer agent team performed? Have investors received their tax documents on time? Is the transfer agent’s financial reporting transparent and easy to understand? Has your transfer agent team been responsive to investor questions in a timely and professional manner? Do investors have access to their account information via a modern web interface supplied by their transfer agent that matches their needs, delivers crucial documents like statements and tax forms and allows them to communicate effectively with management?

A transfer agent that is concerned about how management is perceived by the investors will always provide clear, accurate and comprehensive information, swiftly react to concerns, and provide timely reporting and tax documentation. When transfer agent services are consistent, investors develop trust and satisfaction in their investment decision, boosting their likelihood of participating in future funds with the same sponsor.

2. New Investors - How a Transfer Agent Can Help You Sell

You’ll need to know where to look to get fresh investors for your fund. Data is helpful in sourcing new investors if it provides real insight. The investor record-keeping system of your transfer agent partner should be able to deliver actionable data. However, this is a rare capability among transfer agents. Only a few transfer agent companies have developed technology that can provide full sales and marketing reports based on the historical data from their transfer agent system.

Transfer agent firms use ‘investor record-keeping’ or ‘transfer agent’ systems to keep track of their clients’ investor databases. Transfer agent organizations have established or modified a variety of system solutions to manage the back-office chores of client fund sponsors. The alternative investment transfer agent industry lacks a uniform record-keeping technology. Some transfer agent systems have been modified from those designed for publicly traded funds, which have quite distinct transfer agent needs. Some are a jumble of systems that were cobbled together to try to provide all of the functionality needed for transfer agent activities. Some ‘transfer agent’ systems are little more than repurposed CRM systems.

Only a few transfer agent systems are designed from the ground up to handle the specialized needs of alternative investment funds. Even fewer transfer agent systems are capable of the kind of reporting that reveals important insights for the fund sponsor’s sales team. Comprehensive reporting on sales and transaction history facilitates future sales by combining investor, adviser, sales and transaction data to identify the most likely sources of future sales.

A transfer agent system with reporting that points out the most fertile territory highlighted by prior sales success can help sales teams uncover new investment opportunities. A sophisticated transfer agent system’s reporting capability discloses which financial advisers have the best track records, which investors are the most dependable over the long-term, which regions are the most fertile and who the top investors are. A transfer agent system can help management gather vital sales intelligence and efficiently deploy sales teams, allowing them to raise more funds. Only a sophisticated transfer agent system with extensive reporting capabilities can turn transfer agent data into useful sales information.

A transfer agent system can also help with sales by making the new investment procedure more efficient. Connections between transfer agent systems and industry platforms like AIP and DST FAN Mail, as well as electronic subscription systems like AIX and Wealth Forge and direct digital inputs from client website subscription forms, bring alternative fund investing closer to that of mutual fund investing.

3. Financial Advisors - Some Transfer Agents Are Favored by Brokers-Dealers and RIAs.

A transfer agent’s reputation in the financial advisor community also aids sales. Advisors want simple interactions with transfer agent companies that are free of errors and delays. They also value the most efficient data flow and communication, which will lead to accelerated investor admit dates. The connectivity of a transfer agent system is also crucial. If broker-dealers, RIAs, wire houses, custodians, family offices and other industry participants have live digital connectivity to the transfer agent’s shareholder record keeping system investors and advisers a better, more efficient experience. Connectivity between industry participants and the transfer agent services provider’s system speeds up corrections, verifications and other follow-ups.

Data uniformity and real-time data transmission to and from the transfer agent please financial advisers, eliminating annoying delays and ambiguity. If a phone interaction is required, a responsive, well-informed transfer agent firm capable of promptly addressing concerns makes a great impression. Advisors love interacting with that transfer agent, and therefore with that transfer agent’s client funds. The transfer agent’s efficient and attentive work ethic will almost certainly enhance sales for client funds.

4. Institutional Investors - Their Due Diligence and the ILPA Reporting Template

The largest investors, such as pension funds, endowments, and family offices, consider high-quality outsourced transfer agent services vital in the due diligence process for candidate funds. Many financial institutions consider that fund sponsors that use in-house transfer agent teams are taking an unreasonable operational risk.

Among the members of the Institutional Limited Partners Association (ILPA), a trade association for institutional investors, are the largest and most powerful investors. ILPA recommends that its members seek financial reporting from their portfolio investment funds that follows the ILPA Reporting Template since these investors want maximum transparency for their stakeholders. Each fund’s transfer agent partner must be able to produce a comprehensive reporting package that breaks down portfolio performance, compensation rates, costs, depreciation and every other line item and metric down to the tiniest detail. This transfer agent reporting requirement must also contain thorough information about the fund’s adherence to any and all portfolio investment limits and restrictions imposed on the institutional investor.

Production of this reporting package is a time-consuming and resource-intensive operation even for those transfer agents who are capable of generating the ILPA template. The ILPA template is far beyond the capabilities of most transfer agents. If a fund wants to attract institutional investors, it will need an institutional-class transfer agent that knows how to consistently deliver ILPA-compliant reporting. When it comes to fund raising, having a transfer agent provider with the reporting capability to qualify a fund for institutional money is a major bonus.

What attracts investors to a fund is management’s ability to deliver a return on investment. Fund management has the right to expect a return on its transfer agent services, a return of real monetary value that exceeds the cost of merely performing transfer agent functions.

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