Why Change Fund Administrator?
Fund administration is an essential function for any investment fund, providing critical services such as accounting, reporting, and compliance. The fund administrator is responsible for managing these functions and ensuring that the fund operates in compliance with regulatory requirements and industry standards. However, there are times when a fund manager may need to change their fund administrator. In this section, we will explore some of the reasons why fund managers would do this.
Poor performance
The most obvious reason why a fund manager might want to change their fund administrator is due to poor performance. Fund administrators are expected to provide accurate, timely, and reliable services to the fund, and failure to meet these expectations can have significant consequences. For instance, if the fund administrator is consistently delivering inaccurate or delayed reporting, this can result in reputational damage for the fund and a loss of investor confidence. In these situations, it may be necessary for the fund manager to terminate their contract with the existing fund administrator and seek a more competent provider.
Lack of expertise
Another reason why a fund manager might want to change their fund administrator is due to a lack of expertise. Fund administrators are expected to have specialized knowledge and expertise in fund administration, including accounting, taxation, and regulatory compliance. If the fund administrator does not possess the required expertise, this can result in errors, omissions, and non-compliance with regulatory requirements. In these situations, it may be necessary for the fund manager to seek out a more specialized provider that can better meet the needs of the fund.
Technology limitations
The fund administration industry has undergone significant technological advancements in recent years, with the introduction of advanced software and automation solutions that can streamline processes and improve operational efficiency. However, some fund administrators may not have kept up with these advancements, and their technology solutions may be outdated and inefficient. In these situations, the fund manager may want to consider changing their fund administrator to a provider that can offer more sophisticated technology solutions, which can result in significant cost savings and improved operational efficiency.
Unresponsive or poor communication
Effective communication is critical for any successful business relationship, and this is especially true for the relationship between a fund manager and their fund administrator. If the administrator is unresponsive or fails to communicate effectively with the manager, this can result in misunderstandings, delays, and missed opportunities. In these situations, the manager may want to consider changing their administrator to a provider that has a better track record of responsive and effective communication.
Cost considerations
Fund administration can be an expensive function, with fees typically charged as a percentage of assets under management. However, not all fund administrators charge the same fees, and some providers may offer more competitive pricing than others. If the fund manager is seeking to reduce costs, they may want to consider changing their administrator to a provider that can offer more favorable pricing arrangements. However, it is essential to note that cost should not be the only consideration, and the fund manager must ensure that the new provider can still meet their service needs.
Service provider consolidation
The fund administration industry has experienced significant consolidation in recent years, with many large financial institutions acquiring smaller service providers. While consolidation can result in economies of scale and improved service offerings, it can also result in reduced competition and higher fees. If the fund manager feels that their existing fund administrator has been acquired by a larger financial institution and is no longer providing competitive services or pricing, they may want to consider changing their fund administrator to a more independent provider.
Conclusion
In conclusion, there are several reasons why a fund manager might want to change their fund administrator, including poor performance, lack of expertise, technology limitations, unresponsive or poor communication, cost considerations, and service provider consolidation. Changing fund administrators can be a challenging and time-consuming process, but it is essential to ensure that the fund is receiving the best possible service.
Kensington is a small boutique fund administrator that prides itself on the quality of the work it produces for its clients and its responsiveness to client/investor queries. Also, Kensington has the best in class technology at its disposal which our clients benefit from. Despite this, we are able to keep our fees low since we are a privately owned company.
Contact Graham if you would like to know more about moving your Fund over to Kensington from your existing administrator.
NEXT - WHY OUTSOURCE?