The Benefits of Outsourcing Fund Administration

Trying to find the time to address operational inefficiencies can be next to impossible for most alternative investment fund managers; their time is spent executing their fund’s investment strategy, as it should be. That is why there has been a significant movement towards outsourcing the fund administration function to third parties which helps with reducing the operational burden of managing an alternative investment firm and fund.

There’s much more to it than that, of course. Reducing risk is another consideration for investment managers when outsourcing their fund administration function. And this is probably the most obvious benefit of having a shadow administration provider. Shadow administrators not only provides a check and a balance on your primary fund administrator; it can help identify gaps in the analysis which, when fixed, saves time down the road.

Other benefits of outsourcing the fund administration function include:

Bespoke and Cost-Effective Systems

Many fund managers will employ off-the-shelf software solutions that can be complicated to use; a downside of these products is that their reporting service can be bloated. This makes the provision of data to an investor a more onerous process, as the manager is essentially n trying to squeeze a software product ‘square peg’ – that was not designed specifically for this purpose – into the fund administration ‘round hole’. The more prudent decision is to outsource these functions to a firm that has invested in relevant, specific software and systems as it can lower operating costs and provide more accurate data.

Staffing Needs

A firm that is a fund administration specialist will not need to maintain a huge staff because they are using experts that can do the job quickly and more efficiently. Instead of continually retraining people in your organisation as they move on, you can simply utilize a fund administrator that you only need to train once.

Lowered Costs

An office is expensive. Outsourcing fund administration allows you to keep a streamlined staff, reducing the amount of real estate you need to house employees – and time spent on managing them.

Advanced Scaling

The more your fund grows, the more you will need to onboard new staff and systems and create more structured processes. This can be an incredibly time-consuming task that will likely prevent you from focusing your time on managing the investment strategy. Outsourcing fund administration removes the restrictions of growing at a rapid pace as the infrastructure is already in place.

Anthony D. Mascia is Managing Partner at EFSI. Connect with him on LinkedIn here.

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EFSI is an independently owned, SOC-1 compliant, full-service fund administration firm. We provide accounting, reporting, administrative, and capital introduction services to a wide range of alternative investment funds including hedge funds, funds of funds, private equity funds, real estate funds, venture capital funds, and family offices. The center of EFSI’s service incorporates resilient technology and accomplished staff, providing clients a tailor-made service with exhaustive transparency. Give us a call today or reach out to our support team online. We look forward to hearing from you soon.