Over the past decade, outsourcing middle and back-office activities has increased as fund managers attempt to better focus on their core competencies. Motivated by the desire to scale while keeping operations lean and cost-effective, fund managers have leaned on key service providers to perform functions that were traditionally handled in-house, such as fund accounting, regulatory reporting, data analytics, and portfolio reporting. Although efficiencies and cost savings have been achieved, many fund managers have found it challenging to source third-party providers that fit their needs and manage numerous service provider relationships to handle a growing list of requirements.
There is one service provider that is in the optimal position to provide comprehensive services to private fund managers: the fund administrator. The fund administrator sits at the nexus of most fund-related matters. Gone are the days when a fund administrator’s tasks involved just fund accounting. If done well, a fund administrator can, and should, now serve as a hub for all fund-related data, onboard and communicate fund performance to investors, prepare regulatory reporting, and offer advisory services such as ESG.
For CFOs who need to keep pace with the demands of regulators and investors, manage operational costs, and carve out time for strategic activities, outsourcing more functions to the fund administrator is an option worth exploring. This only works if a fund administrator can serve the role of a trusted partner rather than an outsourced processor. Although fund administrators reside in this advantageous position, most specialize in only one or two areas. Few provide what is needed in the industry: a coordinated approach. Enter stage left: the coordinated service fund administrator. In this blog post, we will provide three ways investment firms benefit from a coordinated service solution.
Accuracy through reporting tools and top-tier tech is essential to maintain the highest level of fund administration services. At its core, fund administrators have accounting systems, reporting tools, and cloud-based investor portals. As fund managers have begun leaning more on their fund administrators to provide ancillary services, they have responded by augmenting their offering with risk management software, portfolio management systems, and data warehouses. Outsourcing presents an enormous opportunity for fund managers to take advantage of the right combination of secured technology platforms and expert data process solutions to meet increased regulatory and investor demands.
People are the game changers. The most experienced professionals are integral to a fund administrator’s success. And, as the fund administrators' role expands, so do their hiring needs. Today, fund administrators who provide comprehensive middle and back-office services hire risk professionals, regulatory compliance experts, data analysts, and ESG specialists, offering fund managers the services they require without the operational overhead. Still, no fund manager should entrust work to someone they wouldn't be willing to hire into their own organization. There is a limited list of administrators who carry that kind of bench.
Fund administrators are in a key position to utilize the data they collect by putting it to work, offering fund managers more accurate and timely insights. The data provides a view into investment performance and risk management and provides fund managers with the information required to complete comprehensive regulatory reports like Form PF. Fund administrators who leverage core data to perform functions across the backbone infrastructure of an asset manager have the ability to save the manager time and money.
As regulatory and investor demands have placed increased pressure on investment firms’ internal teams, CFOs have leveraged outsourced providers to perform critical tasks. The fund administrator is in a key position to provide investment firms with a coordinated fund service solution, helping them achieve operational efficiency, reduce costs, and focus on their core competencies. The fund administrator should be the operational partner to a fund manager, not another outsourced processor. Asset managers who embrace this new role for their administrators will be able to stay ahead of the increasing investor and regulatory demands while still focusing their time and money on their core competencies.
