What to Look for in an Outsourced Management Company Accounting Provider

The majority of investment managers in the US are actually small to medium sized companies – at least, when defined by the number of people they employ. In the alternative investment industry, for example, many hedge fund firms and private equity GPs employ less than 10 people.

And those people focus heavily on fundraising / investor relations, or deal / idea origination and monitoring. That shouldn’t be a surprise, because it’s how they make their money.

And when it comes to accounting, their time is spent much more at the fund level than the ManCo level. That shouldn’t be surprising either, because the accounting at the pooled investment fund level is complex (and you have to get that NAV correct).

That leaves only the most miniscule amount of attention available for the management company accounting. Some firms have a CFO or accountant on staff, and so do much of this themselves. But for those that don’t, or who are looking to outsource, here’s a checklist for what to look for in a provider.

Communication

Choose a firm that is responsive and easy to communicate with. You should be able to ask questions and get clear answers in a timely manner. The ideal firm will be able to tailor their communication style to your preferences, whether that’s face-to-face meetings, phone calls, or email updates.

Experience

Look for a firm with experience in your industry and with businesses of your size. They should be familiar with the specific accounting challenges and regulations that apply to your business type.

Familiarity

Hire a firm that also provides fund accounting services as well as management company accounting services. This will likely help you keep the same account manager or point of contact that you have already, and they will be familiar with how you work, your availability, and your firm and funds generally.

Reputation

Ask for recommendations from other businesses in your industry and check the firm’s online reviews. Look for a firm with a consistent record of providing a range of high-quality accounting services.

Security

Make sure the firm has strong security measures in place to protect your financial data. This includes using secure data encryption and having a disaster recovery plan in place.

Services

Make sure the firm offers the accounting services you need, such as accounts payable and receivable, payroll, and bank reconciliation. Some firms may also offer additional services, such as tax preparation or financial consulting. Hire a firm that can absorb more work as your investment firm grows.

Launching and growing an investment management company continues to get harder, as rising costs due to increasing regulatory scrutiny puts cost pressures on investment firms. Outsourcing the firm-level accounting function, as well as the fund-level one, means lower costs and more time to focus on generating returns for your clients.

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

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.