By Hank Boggio, Senior Managing Director & Chief Revenue Officer of PEF Services LLC

Core fund administration services include partnership accounting, capital call and distribution processing, financial reporting, investor capital account maintenance, audit and tax return support, and investor services.

The choice of fund administrator is important. Choose wisely, and it enhances your reputation, reduces risks, enables you to stay focused on sourcing and managing investments. Choose poorly, and it can impact investor relations, disrupt operations, jeopardize compliance, and hamper your firm’s ability to scale.

CHOOSING THE RIGHT FUND ADMINISTRATION PARTNER

Core fund administration services include partnership accounting, capital call and distribution processing, financial reporting, investor capital account maintenance, audit and tax return support, and investor services.

The choice of fund administrator is important. Choose wisely, and it enhances your reputation, reduces risks, enables you to stay focused on sourcing and managing investments. Choose poorly, and it can impact investor relations, disrupt operations, jeopardize compliance, and hamper your firm’s ability to scale.

Emerging managers have unique requirements related to their lack of a proven track record and lack of experience in setting up and maintaining the infrastructure required to administer a fund.

And while spin-outs may be helmed by proven managers, they are still perceived as potentially lacking the internal resources or experience to adequately administer the fund. 

With this in mind, emerging managers should consider these factors when selecting a fund administration partner:

DON’T choose a fund administrator based on price alone. Make your selection based on factors such as the company’s industry reputation and the years of experience they bring. While a good fund administrator may charge a premium, they will reduce your operational costs and enhance your ability to attract investors.

DO select your fund administrator before you begin fundraising. Partnering with a recognized fund administrator early will help your fund earn the consideration of LPs that may otherwise be hesitant to invest in a first-time fund, as well as those that will only invest in funds that are administered by a third party.

DO ask whether the fund administrator works with other emerging managers, especially those with similar strategies, and ask to speak to those clients about their experiences.

DON’T overlook the technology component of service delivery. Find out which platforms the fund administrator uses, how customizable they are, and pay particular attention to those that form part of the investor experience.

DO examine the fund administrator’s service-delivery processes carefully. Do they adhere to a service-level agreement (SLA)? Do they conduct weekly or bimonthly status calls or meetings? Do they have a documented onboarding process?

DO ask whether they are audited for System and Organization Controls (SOC) Type 2 compliance. Fund administrators with this certification have been examined by an independent auditor to ensure that their internal operations protect the security, availability, processing integrity, confidentiality, and privacy of their clients’ data.

Every GP, whether new or mature, needs to carefully evaluate their options.  Read the white paper entitled Emerging Managers: Staying Lean and Nimble to learn more.  See the checklist provided at the end of the paper which includes a list of general considerations for any GP that is planning to partner with a fund administrator.