Choosing the right fund administrator is a critical decision that can significantly impact a fund's efficiency and success. Fund managers often face challenges such as keeping up with regulatory compliance requirements, accurate and timely reporting, and investor relations, all while striving to maintain operational efficiency. By partnering with a skilled fund administrator, you can streamline operations, enhance compliance, and build stronger relationships with investors.
This guide outlines the key considerations when choosing a fund administrator and provides insights into how a high-quality administrator can benefit your fund.
What does a fund administrator do?
A fund administrator is a third-party service provider appointed by investment funds such as hedge funds, private equity funds, and mutual funds, and even digital assets funds or crypto funds. The administrator is responsible for various administrative and operational functions, including accounting, financial and investor reporting and regulatory compliance. Their services typically include:
- Accounting and Reporting: Maintaining accurate financial records and producing regular, timely financial reports for investors and regulators.
- NAV Calculation: Computing the net asset value of the fund on a daily, monthly, quarterly, or annual basis.
- Investor Services: Managing investor communications, subscriptions, and redemptions.
- Regulatory Compliance: Ensuring the fund complies with relevant regulations and operates in accordance with its Private Placement Memorandum (PPM) or Limited Partnership Agreement (LPA).
Expertise & skill set
Evaluating a fund administrator goes beyond services - they should be an extension of your team. Look for expertise that matches your fund's unique strategy and a skill set that ensures both operational excellence and long-term growth.
- Specialisation: Experience with your specific fund’s strategy and asset classes (e.g., private equity, hedge funds, digital assets) and credibility with your target investors.
- Personnel: The quality and stability of their staff, along with their recruitment practices.
- Longevity: An established track record and industry experience.
In today’s digital landscape, a top fund administrator will leverage advanced technology to enhance service delivery, boost efficiency, and ensure data security - ultimately supporting your fund’s growth. Consider the following:
- Technology Integration: Industry-relevant and updated fund administration software integration for investor onboarding, accounting and reporting, as well as asset-specific systems for strategies like private equity, crypto assets, or loans.
- Data Security: Robust cybersecurity measures to protect sensitive information.
- Automation: Efficiency in handling large volumes of transactions and data through automation.
Ownership structure
Understanding the ownership structure of your fund administrator gives you insights into their stability and long-term vision, in what should be a key partnership for years to come:
- Privately Owned vs. Private Equity- or Bank-Backed: Consider differences in strategic priorities, financial return horizons, management team stability, and financial investment.
- Independent Operations: The potential for unbiased service provision in independent firms.
Long-term mindset
A fund administrator with a long-term mindset is invested in your success, ensuring continuity and a stable partnership that grows alongside your fund. Assess the administrator’s commitment to stable relationships by examining:
- Staff Turnover: Low turnover rates can indicate a stable and experienced team with aligned interests.
- Client Retention: Long-term client relationships often reflect high service satisfaction.
Relationship-driven approach
A relationship-driven fund administrator focuses on building strong, lasting partnerships:
- Client Service: Look for dedicated client service teams that provide personalised attention and accessible, responsive operations.
- Communication: Ensure there are regular and transparent communication channels.
International Footprint / Cross-Jurisdictional Capability
A global presence is crucial for ensuring smooth operations across multiple jurisdictions, helping your fund remain compliant and flexible in an evolving regulatory landscape:
- Office Locations: Availability of offices in key financial centres.
- Cross-Jurisdictional Services: Ability to navigate and comply with different regulatory environments, especially for parallel fund structures.
Other factors to consider:
- Quality / Internal Controls: Robust internal controls ensure accuracy and reliability. Look for administrators with ISAE 3402 or SOC 2 classification.
- Assets Under Administration (AUA): Consider the scale and scope of the administrator’s operations.
- Wide Range of Services: Ensure they offer comprehensive services to meet all the needs of your fund and its ancillary entities.
- Scalable Service Capability: The ability to support your fund’s growth.
- Cost Structure & Transparency: Seek clear and transparent pricing with detailed service level agreements.
- Regulatory Expertise: Research the administrator's ability to stay in compliance with AIFMD, FATCA, CRS, and EU SFDR. The regulatory environment is becoming increasingly complex and requires an administrator who stays up to date on changing requirements.
Doing your due diligence when choosing a fund administrator
Conducting thorough due diligence is crucial when selecting a fund administrator. Consider the following steps:
- Background Checks: Research the administrator’s history, reputation, and regulatory standing.
- References: Request and contact references from existing clients.
- Site Visits: Conduct on-site visits to better understand their operations and meet with the other third parties, such as lawyers, auditors, bankers or even regulators.
- Service Level Agreements (SLAs): Review SLAs to ensure they meet your expectations for service delivery and performance.
By evaluating these factors, you can choose a fund administrator that not only supports your fund’s current needs but also serves as a trusted partner committed to driving your long-term success. When considering the cost of administration services, remember that as Warren Buffett said, “Price is what you pay; value is what you get.”
How we can help
At Trident Trust, we offer a range of tailored fund services designed to meet the needs of diverse investment strategies. With over 700 alternative asset funds worldwide and $60 billion in assets under administration, our expertise spans private equity, private debt, venture capital, hedge funds, real estate, and digital assets.
Our Services Include:
- Comprehensive Administration: From fund setup to daily operations, we handle all aspects of fund administration.
- Advanced Technology: We use institutional-grade platforms to ensure efficiency and security.
- Global Reach: With offices in 12 fund domiciles, we provide seamless cross-jurisdictional support.
Explore how Trident Trust's fund administration services can enhance your fund’s operations by visiting our Fund Services page or contacting Karine Seguin, at kseguin@tridenttrust.com.