Fund Administration: A Differentiator in an Increasingly Complex World.

Posted by Wouter Plantenga on Mar 25, 2019 8:41:03 PM

Wouter PlantengaGuest Article from Wouter Plantenga, ICS Head of Group Client Services, and Kobus Cronje, Managing Director – South Africa, JTC

Hosting a webinar recently with the IMDDA gave us a fantastic opportunity to explore some of the ways in which fund administration is evolving and highlight why we think third-party administration has a critical role to play in the future of asset management.

Ultimately, fund administration is a set of outsourced services and activities designed to support the
life cycle of a fund.

Generally speaking, fund administrators perform a wide variety of services for alternative investment
funds which could include calculating the net asset value of a fund, providing investor reporting
services, managing regulatory communications and providing secretarial, treasury and governance
services.

The intention is that, by outsourcing these services, fund managers are able to concentrate on their
core competencies and portfolios, thereby enhancing asset values and returns.
It is certainly our experience that investor appetite to explore specialised areas and new markets is
driving the demand for greater fund administration support.

Alternative asset classes, such as private equity, real estate and infrastructure, for instance, are
moving centre stage to complement investor appetite for traditional investments, with investors
increasingly exploring niche opportunities such as FinTech.

Support also needs to be increasingly global, with investors engaging in multiple jurisdictions, time-
zones and currencies, requiring knowledge of different regulatory frameworks, legal systems and
reporting requirements.

In addition, rafts of complex international regulation combined with ever-greater investor demands is
putting pressure on margins, which means that having the support of a dedicated back-office supplier
can not only support the growth ambitions of a manager but act as a real differentiator in the minds of
investors too.

Selecting a third-party administrator can offer significant benefits, including cost-efficiency compared
to in-house solutions, genuine independence, accountability and specialisation in specific areas.

In particular, the systems that fund administrators operate can provide real advantages. Today,
investors are demanding greater transparency over what systems are being used as part of their own
due diligence procedures with specialist platforms and accounting systems very much the order of the
day. The scalability and ongoing investment in these systems that a third-party administrator can offer
also frequently makes outsourcing a cost-effective option for managers.

Being able to draw on the people and expertise of a specialist administrator also offers huge benefits.
With the private equity environment being generally cyclical, for example, staffing for managers can
be tricky and create inefficiencies during quieter periods, whilst administrators can spread their
workload across peaks and troughs, offer some welcome service continuity and provide insights into
niche areas.

Looking forward, it is absolutely our conviction that third-party fund administrators will play an
increasingly pivotal role in the global asset management landscape.

Rising investor demands, a drive towards excellence and a focus on data analytics means that those
managers that can demonstrate they have the backing of a fund administrator that is an expert in
regulatory issues such as AIFMD, that has knowledge in specialist areas such as ESG, and that
operates cutting-edge digital or blockchain-based systems, will be much better positioned in a
complex environment. In turn, that should give investors much more confidence too.

Due diligence questions?

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