The largest investors, pension funds, endowments and family offices, regard high-quality outsourced transfer agent services as part of their due diligence process for candidate funds. Many financial institutions think that fund sponsors who operate in-house transfer agent teams take an unacceptable operational risk.
Many institutional investors are members of the Institutional Limited Partners Association (ILPA), a trade association for the industry. ILPA recommends its members seek financial reporting from their portfolio investment funds that follows the ILPA Reporting Template because they want maximum transparency for their stakeholders. The transfer agent partner must be able to create a complete reporting package that breaks down portfolio performance, compensation rates, costs, depreciation, and every other line item and metric of the fund in granular detail. This transfer agent reporting challenge must also include detailed reporting on the fund’s adherence to any and all portfolio investment limits and restrictions imposed on the institution.
Even for those transfer agents who can generate the ILPA template, it is a time-consuming and resource-intensive operation. The ILPA Template is far above the capability of most transfer agent firms. If a fund wishes to attract institutional investors, it will need an institutional-class transfer agent who is familiar with the ILPA template and can rapidly prepare it. When it comes to fund raising, having a transfer agent provider with the reporting ability to qualify a fund for institutional money is a major bonus.
The return on investment that management has been able to generate is what attracts investors to a fund. Fund management has the right to expect a return on transfer agent services, a return that goes beyond the mere fulfillment of transfer agent responsibilities and has meaningful financial benefits.