Top 10 Considerations in Choosing a Third-Party Fund Administrator
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Top 10 Considerations in Choosing a Third-Party Fund Administrator

by Jason Gilbert, David Erard
April 26, 2021

If you have decided to enlist the support of a third-party administrator or switch from an existing provider relationship, there are a number of important questions to ask so you can capture the expected benefits quickly and easily. 

Some of the important elements for fund managers to evaluate include: 

Onboarding. How quickly and efficiently can you transition to the third-party administrator? Will data have to be converted to a different format or system? Will manual effort be required to ease the transition? If so, who will perform it?

How well does the third-party administrator understand your fund? Will you have to provide basic information to help them get up and running? Will they be able to resolve routine activity and provide you with advice, or will you have to hold their hand and respond to basic inquiries?

Reporting capabilities. Is the administrator flexible enough to provide statements in the format you’re using, or will they expect you to adapt your reports to match their standard capabilities? Will investors question any format change in your statements?

Does the provider offer an investor portal? Will investors have easy access to real-time and historical performance data? Can investors model this data on the portal to generate their own insights? Are the appropriate cybersecurity features in place to mitigate the risk of unauthorized access?

How comprehensive is the provider’s offering? Does the provider offer a full suite of accounting (for the fund and general partner), investor management, tax reporting and complex advisory services? If not, do you have the people or other professionals in place to handle your needs. 

Timing. How long after a period or fund close will the provider need to prepare and deliver distributions, statements and other important documents? How will this align with investors’ past experience and expectations? How much of this process will be automated? 

Is the relationship system-agnostic? Are their tools sophisticated enough to adjust to your needs, or do they expect you to follow a cookie-cutter data approach? Would your data require manual reformatting for their systems? Data issues can dilute many of the efficiency gains and cost savings you’re pursuing from an outsourcing relationship. 

Cash management. Is the fund administrator flexible to your needs and willing to support this function? Who on their team will need access? 

Audit support. How responsive and efficient will the provider be in preparing audit-related documentation and answering any questions that arise during the audit process? Does the third-party administrator have the experience to be able to understand an auditor’s question, and to assemble and provide the required information quickly?

Are they likable? This quality is potentially more subjective, but given that you’ll work closely with the outsourced administrator’s team, do you think the relationship will go smoothly? Any concerns in the early stages of your discussions could be a warning sign that a relationship may not represent the best choice for your needs. 

Investing time to explore the considerations listed above can provide important insights to help you select the right third-party fund administrator and capture the benefits you expect from this important support relationship.

For questions or to learn more about our third-party administration services, contact our experts.

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