Five Reasons to Outsource Fund Administration
by Liam McHugh | Managing Director – APAC Fund Administration
As you continue to grow your business offering, you may also have outgrown your in-house resources, making it increasingly difficult to handle all the back-office functions yourself. This challenge, however, should not interfere with your focus on your core responsibilities.
Being able to partner with a reliable, independent provider can be incredibly beneficial, for private equity fund managers and their investors. If you’re considering outsourcing, here are five key factors to consider as you make your decision.
A focus on core capabilities
Like many of us, fund managers are constantly pressed by both time and capacity constraints that make their jobs challenging. Increased regulatory requirements and an uptick in the volume and complexity of investor requests are just a few challenges, which makes freeing up internal operational resources all the more important. Outsourcing fund administration tasks allow fund managers to focus more on their core capabilities, so they can do what they do best: raise and deploy capital.
Increased LP requirements and demands for oversight
Whether driven by the ever-changing regulatory landscape or otherwise, the reporting requirements of LPs are continuing to grow both in volume and complexity. This is often accompanied by a LP’s desire for independent, third-party oversight. Investors have greater confidence knowing that independent subject experts are involved in financial reporting, regulatory, compliance, and other complex matters regarding fund operations. Significant regulatory and tax changes introduced in recent years―such as FATCA, CRS, and Partnership Representative (IRC 6223)―have also driven the outsourcing of these services to specialist providers to ensure compliance.
Ability to reduce cost
Based on industry analysis, the cost associated with engaging an outside fund administrator is lower than keeping the work in-house. As fund managers grow their business, outsourcing provides a scalable solution that helps eliminate additional commitments to the costs associated with expanding an internal back-office. In addition, most Fund’s LPAs are now allowing direct payments for fund expenses associated with engaging third-party fund admin providers.
Industry expertise
Outsourcing fund administration tasks provide fund managers with instant access to a dedicated team that supports them. This means they can access expertise and experience in fund accounting, investor reporting, regulatory and compliance requirements, and other special areas of fund operations at any time. Additionally, administrators now attract and retain subject matter experts that provide not just technical accounting expertise, but also overall relationship management to their clients.
Reliable technology solutions
Access to an administrator’s technology platform allows fund managers to eliminate the costly investment that comes with developing and maintaining internal systems. Engaging a fund administrator is the most cost-effective approach to access innovative and customizable technology, thereby providing the most transparent reporting capabilities to investors.
These five key factors, as well as other significant reasons, mean that outsourcing administration is not only gaining in popularity, but also becoming the norm. To help you decide if outsourcing makes sense for your business, visit https://www.cscglobal.com/service/gfm/fund-administration/.
View all of the blogs in our three part series:
Part 1: Five Reasons to Outsource Fund Administration
Part 2: Five Key Considerations when Selecting a Fund Administrator