Most Read Contributor in British Virgin Islands, February 2017
There is a growing segment of the hedge fund and private equity
fund service provider population called the Outsource CFO.
Outsourcing has become very popular in recent years, in regards to
back office, middle office, compliance (including outsourcing the
investment advisers CCO), trading, and most other areas that a
hedge fund needs to operate. What could be considered the final
frontier of the service provider population is the Outsource CFO.
The Outsource CFO model assists the start-up or smaller fund
manager, who may not have the budget or the need for a full time
CFO. So, instead of hiring someone who may not have the appropriate
experience in order just meet the budgetary restrictions, fund
managers can now opt to hire an Outsource CFO.
So why use an Outsource CFO?
Many prospective investors will require that you have policies
and procedures in place, conduct operational due diligence, and
require that there is someone else involved in the operation of the
firm other than just the founder/portfolio manager. The days of a
guy/girl and their Bloomberg are over – which is not
necessarily a bad thing – as the current investor
requirements are meant to ensure that all investor capital is
protected from potential fraud or just a simple oversight/error in
the books and records of the firm. A portfolio manager, who may be
very experienced and competent at deploying capital, may not have
the necessary experience to ensure that the fund administrator is
keeping the books and records accurately, or ensure that the audit
and tax work is done in a proper and timely manner, or have
experience reviewing fund formation documents or service provider
agreements to ensure that that terms and conditions are correct for
the strategy of the fund manager. The Outsource CFO has experience
in these areas and can give a great deal of comfort to prospective
investors and enable the fund manager to concentrate on what they
do best – investing the investors' capital.
There are multiple types of Outsource CFO firms in the industry.
Larger firms can provide a team but will not necessarily provide
the personal service or partnership that you would hope for from a
CFO. Larger firms can also be expensive, almost to the point of a
base salary for a full time CFO. Sole proprietorships may be
cheaper but cannot provide any back-up support, as there is only
one person available to do the work – if that person is not
available then the work suffers.
Lastly, and perhaps more importantly there are the boutique
Outsource CFO firms that provide both the back-up support of the
larger firms and the agility to partner with your firm and offer
the rates that a start-up fund or small manger can more easily
afford. The other advantage of the boutique Outsource CFO firm is
their potential flexibility in terms of both the services provided
and the fees that are charged. While some fund managers may be
looking for just the bare minimum service, others may be looking
for more of a full-service Outsource CFO – although still not
quite a full time CFO at a full time salary. The Outsource CFO firm
can also assist clients by drawing on the wealth of experience from
both their prior experiences, as well as the current client base of
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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When Walkers was launched as an offshore law firm in 1964 in the Cayman Islands it is fair to assume that the founders would never have dreamt their creation would, fifty years later, be working in a cross-border restructuring market driven by China.
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