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Private Capital’s Next Quantum Leap: The stages of the life cycle

In the past, successful fund managers could focus on the fundraise and fund launch, while ongoing administration and management of the fund was a perfunctory part of the process. But the dramatic changes in alternative investing have had equally dramatic implications for the fund life cycle. Intense competition for allocations and intense scrutiny from regulators have transformed the end-to-end life cycle from a routine process to a complex and strategic operation.

The benchmark against which fund managers are evaluated

Every decision is crucial to the success of the fund, the quality of the investor experience, and the reputation of the fund manager. This includes decisions about the way a fund is structured and domiciled, how it is administered, and the way it is liquidated.

It requires careful planning to deliver the level of diligence and dexterity needed to meet the expectations of investors and their beneficiaries, the demands of auditors, regulators, and statutory requirements, and the best interests of the portfolio investments. It also requires coordination across the lifespan of the fund and across multiple domains of expertise, including areas such as audit and tax, administration, reporting, legal, and custodial.

Delivering to these expectations requires an understanding of the life cycle for closed-end funds.

The stages of the life cycle

The fund life cycle can be separated into four stages, with fund administration at the core. Each, when managed wisely and efficiently, contributes to the success of the fund.

FUND FORMATION Assigning the right formation, structure, and jurisdiction to a fund has a significant impact on its stability, liquidity, and returns.

RAISING CAPITAL Delivering the right investor experience while carefully assessing anti-money laundering (AML) and know your customer (KYC) risk is critical to the success of the fundraise and the speed of the close.

INVESTMENT AND PORTFOLIO MANAGEMENT Fulfilling corporate oversight, governance, and cross-border transaction requirements ensures you avoid conflicts of interest, reinforce compliance, and enhance investor trust.

REALIZATION AND LIQUIDATION Often overlooked, the way a fund is liquidated can dramatically impact both timelines and investor returns.

FUND ADMINISTRATION The foundation for investor experience and regulatory compliance throughout the fund’s lifespan, fund administration ensures operational coordination and transparency at every step.

From single-point solutions to ecosystem

The fund life cycle is a complex undertaking that involves adherence to a growing array of security and privacy laws, compliance with rapidly multiplying global regulatory requirements and standards, optimization of cash flow and tax advantages, and delivery of a consistent, transparent, and trusted investor experience.

As a result, fund managers are increasingly looking for service partners capable of supporting greater domain expertise, cross-domain coordination, technology enablement, and service orchestration.

Global expertise

As the alternative asset class matures, the success of the fund and long-term success of the fund manager must be supported by a broader knowledge base than ever before. In addition to ongoing fund administration and reporting, the life cycle of the fund involves fund formation and entity management, custodial, trust and agency services, legal and corporate secretarial services, regulatory compliance, and fund wind down services.

In addition to this ever-broadening set of specialist domains, most fund managers will need to prioritize the selection of service partners that can support their firm’s growth wherever it may take them. During market volatility and everchanging economic landscapes, opportunities can arise anywhere, and it requires new levels of mobility and agility to seize them. Fund managers with plans for growth need service partners with global reach and local knowledge to help navigate new tax and regulatory frameworks and investor bases.

For example, fund managers launching a fund in the EU for the first time will need a service partner with depositary capabilities. For U.S. funds, a deep and current knowledge of the SEC’s evolving regulations is crucial. And in APAC, the combination of a stringent Anti-money Laundering and Countering Financing of Terrorism (AML/CFT) Act and a less experienced investor base requires a very different approach to onboarding.

More region-specific trends and nuances are explored in the full insight report: The Next Evolution in Private Capital

How CSC helps

CSC is the trusted partner of choice for more than 90% of the Fortune 500®, more than 90% of the 100 Best Global Brands®, and more than 70% of the PEI 300.  We provide tailored administration and strategic outsourcing solutions to support the complex world of alternative asset managers across jurisdictions and asset types while adhering to global regulations and compliance.

Founded in 1899 and headquartered in Wilmington, Delaware, USA, CSC prides itself on being privately held and professionally managed for more than 120 years. CSC has office locations and capabilities in more than 140 jurisdictions across Europe, the Americas, Asia Pacific, and the Middle East. We are a global company capable of doing business wherever our clients are—and we accomplish that by employing experts in every business we serve. We are the business behind business®.