4 Things to Consider When Selecting a Fund Administrator

Choosing the best fund administrator for your business is no easy task. Given their crucial role in fund accounting, tax administration, reporting to investors, and more, there are several pieces of criteria that business leaders should consider when selecting a fund administrator. That’s why we’re sharing the four key things to take into consideration when making this decision.

1. Quality

When we say quality, we mean specific attributes that can make or break a fund manager’s ability to truly provide you with a competitive advantage:

• Years in business: how long have they administered funds?
• Firm track record: do they have a track record that shows how their reputation has been built from tangible proof? Is the firm profitable or growing?
• Client churn: how many clients have they lost within the past five years, and for what reasons?
• Specialization: is the fund manager a generalist or specialist of certain asset classes? Does the administrator have experience with your specific investment strategy or type of assets?
• Financial structure: what is the ownership structure, equity, and debt of the firm?
• Company size: does the firm have enough human capital in order to support the quality of services you want?

2. Internal controls

Fund managers typically handle a range of middle and back-office functions, which is why their firm must have effective measures in place to ensure accurate reporting as well as compliance with laws and regulations. The fund administrator you choose should have at least their SSAE 18 SOC 1 Type 1 Audit certification in addition to a business continuity plan. Furthermore, you should look into who conducted the internal controls systems review and be sure fully understand their service agreement before signing a contract.

3. Range of services

Outsourcing fund administration services commonly come from the desire to grow the business’s own offerings by focusing on core responsibilities. That’s why it’s important that a fund administrator offers the range of services your firm needs in order for it to truly serve as an extension of your own business. Here are examples of possible services:

• Middle and back office
• Accounting
• Performance and risk reporting
• Fund start-up and liquidation
• Investor relations
• Valuation
• Carry administration
• Tax planning and compliance
• Financial statement assembly
• Audit support

The fund administrator should also have the skills and experience to ensure these services are executed to the highest standard. Look for a fund administrator that can handle global operations, complex asset classes, foreign exchange, derivatives, and more.

4. Deliverables

A strong fund administrator should clearly define their deliverables so you can be assured that you’ll receive the reports and statements when you need them. For example, you should know when the administrator will deliver your net asset value and investor statements. And, in the case of handle errors, how will they ensure business continuity? Furthermore, the deliverables should be clean, comprehensive, and clear—so communicating your financial position to investors will be straightforward and smooth. 

Focus on Growing Your Business with FinStrat Management

Ready to gain a competitive advantage as your firm grows and scales? Founded in January 2017 and based in Annapolis, Maryland, FinStrat Management provides venture capital firms with end-to-end back-office accounting and administration service solutions. Let’s get started with a free consultation today.