Is Your Independent Fund Administrator Really Independent?

In the world of finance, independence is a critical concept. It is essential for ensuring that decisions are made objectively and without bias. This is particularly important when it comes to fund administration, where independence is necessary to ensure that investors’ interests are protected. However, not all fund administrators are created equal. In this article, we explore the question: is your independent fund administrator really independent?

First, let’s define what we mean by “independent” in the context of fund administration. An independent fund administrator is one that is not affiliated with any investment manager, custodian bank, or other financial institution. This independence is important because it ensures that the administrator is not subject to any conflicts of interest that could compromise their objectivity.

However, simply being independent in name is not enough. In order for a fund administrator to be truly independent, they must be able to demonstrate that they are free from any influence that could compromise their objectivity. This means that they must have robust governance structures in place to ensure that they are operating independently of any external pressures.

One of the key ways to assess the independence of a fund administrator is to look at their ownership structure. If the administrator is owned by a financial institution, then there is a risk that their independence could be compromised. For example, if the administrator is owned by a custodian bank, then they may be more inclined to favor the interests of the custodian bank over those of the fund’s investors.

Another important factor to consider is the governance structures that are in place within the administrator. This includes the composition of the board of directors, the procedures for managing conflicts of interest, and the internal controls that are in place to ensure that decisions are made objectively. A truly independent fund administrator will have robust governance structures in place that are designed to ensure that they are operating independently of any external pressures.

Finally, it is important to consider the culture of the fund administrator. Are they truly committed to independence, or is it simply a marketing slogan? A truly independent fund administrator will have a culture that values objectivity and transparency above all else. They will be willing to push back against external pressures, even if it means losing business. This is the hallmark of a truly independent fund administrator.

Independence is a critical concept in fund administration. In order for a fund administrator to be truly independent, they must be able to demonstrate that they are free from any influence that could compromise their objectivity. This means having a robust ownership structure, governance structures, and culture that is committed to independence. By carefully evaluating the independence of your fund administrator, you can ensure that your investors’ interests are protected and that you are working with a truly independent partner.

Kensington is a privately owned company.  We are happy to discuss our Governance structures with clients and potential clients so that they can gain comfort on our independence.  Please contact Graham MacDonald if you wish to find out more.