By Hank Boggio, Senior Managing Director & Chief Revenue Officer of PEF Services LLC
General Partners are operating in an era of increased regulatory scrutiny, more sophisticated investors, narrowing margins, and operational complexity, and many are turning to their fund administrators for solutions.
But while in many cases the relationship has fulfilled the expectation, in others the reality has fallen short of the promise. General Partners are rethinking their needs and replacing fund administrators that don’t meet performance, service and technology standards.
When fund administrators fail to keep pace with the needs of their clients, it usually comes down to five key factors.
Service quality. Dissatisfaction with service quality, which could include accuracy, responsiveness, and expertise, topped the list of reasons General Partners decide to replace their fund administrator.
According to Preqin, dissatisfaction with service quality is the top reason for switching to a different fund administrator, with 27% of fund managers citing this as the main reason behind the switch.
Regulatory requirements. While regulatory pressures continue to rise, not every fund administrator has been able to meet the need for more detailed, rigorous accounting and compliance.
Given that regulatory issues are a clear priority, fund administrators should be capable of supporting compliance reliably, yet 23% of General Partners are motivated to switch fund administrators because of concerns over regulatory compliance.
Portfolio complexity. As fund managers expand into more complex fund strategies, they may discover that their fund administrators don’t have the expertise or resources to support them in these new areas.
If your firm has or is planning to diversify into more complex fund strategies and you need to find a service partner capable of supporting your efforts, look for a fund administrator with specific expertise and active clients in the relevant areas.
Cost. As margins continue to get squeezed, General Partners are seeking ways to maximize the value they see from their fund administration services.
When cost is enough of a concern to trigger a switch to a new service provider, the issues are likely to be related to the value the General Partner receives rather than the hard costs alone.
Technology. Technology adoption is uneven among fund administrators, yet it can significantly enhance a fund administrator’s ability to support both the General Partner and their investors.
No service team—no matter how efficient and experienced—can maintain the required speed and reliability without access to advanced database and automation technologies.
Apprehension about transitioning from one fund administrator to another can cause General Partners to delay the process, even when the current solution is clearly not working. But a well-planned and detailed transition can ease the migration and ensure that back-office processes and investor services experience minimal disruption.
Change is never easy, but when the General Partner and fund administrator follow best practices for the transition, the potential for disruption and downtime can be minimized or even eliminated.
These checklists for General Partners and their fund administrators are designed to smooth the transition and address some of the most common onboarding issues.
To learn more about the ways in which General Partners can make a more informed, successful choice the second time around, read this white paper, Making the Switch.