Considering outsourcing your back-office functions? If so, your first question should be simple: How do I go about selecting the right fund administrator for my business? Selecting a provider that is experienced, understands the intricacies of your business, and is a partner you can build a long-term relationship with are certainly beneficial aspects. If you’re in the process of looking for a fund admin provider, here are five key factors to consider.
Firm structure
Finding an established provider that is stable and, ultimately, not for sale, is critical. Currently, there are unprecedented levels of M&A activity within industry. When a firm is acquired, it typically undergoes significant periods of uncertainty, experiences key member turnover, or, even worse, may not be able to support your business platform or strategy. This very well could create turbulent relationships or decrease the quality of service. Partnering with a provider that is privately owned is a simple way to avoid these risks.
A full range of service offering capabilities
As the role of fund administrator continues to evolve, providers need to offer expertise across a wide range of core and ancillary services. These services include knowledge of regulatory requirements across multiple jurisdictions and the domiciliation of structures. Fund administrators that offer a comprehensive offering are more desirable. Partnering with an experienced, full-service provider integrates your entire back-office function within a single structure.
Established controls and oversight
Handing over your back-office functions to a new partner is a big deal. Who will physically do the work? How will it be reviewed and approved before it is sent to you and, ultimately, to your investors? Ensuring a fund administrator has a SOC 2 Type 1 Audit certification is a good measure of internal controls and governance. Before signing any contracts, go through a due diligence process to fully understand the service agreement you are entering into, and seek assurances that your new partner will meet your compliance expectations.
Technology solutions
The accounting systems used by fund administrators should be able to handle the most complex alternative fund structures. Take the time to ensure the provider has an advanced system with a fully integrated capacity to report at investor and fund levels simultaneously. This will minimize errors and save significant time you’d normally spend producing reports. Integrated systems also provide efficiency of ancillary services, such as tax preparation, capital call and distribution processing, waterfall calculations, and more. While requesting a certification of security standards is not a guarantee against future security events, it validates the partner meets industry standards and practices.
Finding the right fit
Finding a partner who can support and enhance the uniqueness of your back-office operations is key. Partnering with an experienced, boutique administrator that can provide a personalized service based on your specific needs may be a better fit over a much larger administrator. Boutique firms are often more experienced and quicker to align their services with your needs and expectations, allowing your team to focus on core priorities of driving investment decisions, raising capital, and increasing investor returns.
Outsourcing fund administration is not only gaining popularity, but becoming the norm. If you’re considering outsourcing or in the selection process, visit https://www.cscgfm.com.
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