From more flexible, scalable operations to meeting due diligence standards and achieving significant cost savings, private equity managers can gain a lot from outsourcing to an independent fund administrator. Since outsourcing is a fundamental move away from doing everything in-house, here are some key benefits and other factors to consider.
Enhanced transparency and efficiency
Think you're lowering your risk by keeping all administrative functions under the one roof? Your investors likely think otherwise. Most investors' operational due diligence (ODD) preferences include independent, third-party administrators. In fact, when courting investors for a new fund – especially those based in Europe – appointing a fund administrator can be non-negotiable. Outsourcing the accounting books and records also frees up your time, so you can focus on investing and driving returns for your fund.
Are your software systems keeping pace with your funds' growth and structural complexity, or are you still managing everything via spreadsheets or generic accounting platforms? Outsourced providers continually monitor developments and invest in the latest tools and Artificial Intelligence solutions, all-in-one allocation and general ledger solutions like Investran, and investor portals such as Investment Café. This ensures your fund is being administered with up-to-date technology, purpose-built for private fund accounting.
An in-house administration team is an expense of the firm. But, when outsourced, it becomes a relatively small, expected and reasonable expense for the fund. Consequently, your business can realise significant cost savings and offer reassurance to limited partners.
As your firm adds more funds, co-investments and other entities, your need to add operational, accounting and investor services staff increases. The consistent distraction of hiring and managing people is real. In an outsourced model, additional funds or entities are taken care of with a simple call to your administrator. You are converting the fixed costs of people and infrastructure to the variable cost of an administrator.
Other factors to consider
Outsourcing your fund administration brings significant benefits and allows you to focus on your investments. However, when selecting the right provider, thought should be given to workflows, day-to-day communication, ultimate decision making and onboarding to ensure compatibility.
to see how your shortlisted outsourced service providers measure up against these and other key areas.
Talk to TMF Group
Whether you're ready to dive in at the deep end or take smaller steps toward outsourcing, we can help. Our bespoke solutions include supporting you at the current stage of your administration infrastructure journey. Let us take on only specific funds, certain entities or administrative elements. We offer a seamless global service, coordinated through a single point of contact, based near your operational teams in any of the major fund jurisdictions.
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.