Why Outsource Fund Administration?

Fund administration is a critical function that ensures the smooth running of investment funds. It involves the management of the operational and administrative aspects of a fund, such as accounting, reporting, and compliance. While fund administration can be done in-house, many fund managers opt to outsource this function to third-party service providers. In this article, we will explore the benefits of outsourcing fund administration.

Cost savings

One of the primary benefits of outsourcing fund administration is cost savings. Setting up an in-house fund administration team requires a significant investment in human resources, technology, and infrastructure. Additionally, the ongoing operational costs, such as salaries, benefits, and maintenance expenses, can quickly add up. By outsourcing fund administration, fund managers can reduce these costs and allocate their resources to more strategic initiatives.

Service expertise

Outsourcing fund administration provides access to a team of experienced professionals who specialize in this area. Third-party service providers have the resources to attract and retain highly skilled personnel, who possess the knowledge and expertise required to manage fund administration activities. These professionals are up-to-date with the latest industry trends, regulations, and best practices, ensuring that the fund’s operations are in compliance with regulatory requirements and industry standards.

Scalability and flexibility

Outsourcing fund administration provides fund managers with the ability to scale up or down quickly, depending on the needs of the fund. For instance, if a fund experiences a sudden increase in assets under management, the service provider can quickly scale up their resources to accommodate the increased workload. Conversely, if the fund’s assets under management decline, the service provider can reduce their resources accordingly, avoiding the need for costly layoffs or restructuring.

Efficiency and automation

Fund administration involves a lot of manual processes, which can be time-consuming and error-prone. Outsourcing fund administration provides access to sophisticated technology solutions that automate many of these processes, reducing the risk of errors and improving operational efficiency. Additionally, these technology solutions can provide fund managers with real-time access to critical information, enabling them to make informed decisions quickly.

Risk management

Fund administration involves a range of risk management activities, such as regulatory compliance, valuation, and reporting. These activities are critical to the success of the fund and require specialized knowledge and expertise. By outsourcing fund administration, fund managers can transfer the risk associated with these activities to the service provider, who assumes responsibility for ensuring that the fund’s operations are in compliance with regulatory requirements and industry standards.

Improved investor confidence

Investors are increasingly demanding greater transparency and accountability from investment managers. By outsourcing fund administration to a reputable third-party service provider, fund managers can demonstrate their commitment to these values, improving investor confidence in the fund’s operations. Additionally, by outsourcing fund administration, fund managers can provide investors with timely and accurate reporting, improving transparency and reducing the risk of disputes.

Conclusion

In conclusion, outsourcing fund administration offers a range of benefits, including cost savings, service expertise, scalability and flexibility, efficiency and automation, risk management, and improved investor confidence. By outsourcing fund administration, fund managers can focus on their core competencies, such as investment management, while leaving the operational and administrative aspects of the fund to specialized third-party service providers. Ultimately, outsourcing fund administration can improve the overall efficiency and effectiveness of the fund, enhancing its value proposition for investors.

Contact Graham if you would like to know more about outsourcing the administration of your Fund to Kensington.

NEXT - WHY BERMUDA?