The value of outsourcing fund administration

Among hedge funds, private equity companies, and many other players in the securities industry, outsourcing fund administration has become ever more commonplace. Fund administration covers financial reporting, accounting, daily, weekly, and monthly computation of NAV or Net Asset Value, and fund portfolio valuation, among other roles.

This article discusses the value of following this growing trend.

Through fund administrators, asset managers can access scalable solutions. The world of fund management is a complex one, and challenges here need to be met with the solution that responds to their nature. Asset managers need to display a commitment to keep tabs on –and adapt to – the developments in the market. This, in turn, calls for scalable solutions that will provide just the right kind of support based on the manager’s assessment of such factors as the investment risks, the yield rate, and the opportunities for growth. Fund administrators can provide this, because they have the time and resources to develop customized tools for the asset management firms that they serve.

Fund administrators can take on the red tape and compliance duties. Dealing in fund management entails facing bureaucracy at different levels. This can refer to negotiating with industry regulators, preparing the many reports that must be submitted on a regular basis, and ensuring that company practices adhere to the pertinent federal laws. Fund administrators can also take care of preparing and filing reports to local regulatory bodies, and monitor fund movements vis a vis anti-money laundering rules.

With their assistance, day-to-day fund management operations become much more efficient. Fund administrators have mastered – and have the tools for – the tedious tasks that come with fund management. For example, they can deftly handle the calculation of the yield and other metrics important to the client, conduct regular valuation and asset verification, price securities based on the present market value, and perform daily reconciliation of statements of the investment manager, the bank, and all involved brokers. On a daily basis, they also oversee the purchase and sale of securities, as well as distribute the dividends arising therefrom.

Truly, in many ways, fund administration services help asset management firms promote efficiency in their operations, and let them be more responsive to the demands of the market. With their assistance in all phases of fund management, managers will see a much higher level of quality of operations, one that greatly benefits from automation, real-time information delivery, and consistency of results.