Brian A Jackson
Whether you are an emerging manager, an established manager looking to grow or a large manager looking for greater efficiencies, today’s landscape of fund administrators offers many sound options. Michael Von Bevern, U.S. Bancorp Fund Services, summarises the important factors.
Choosing the right fund administrator is an important but often difficult decision. A choice made for the wrong reasons can cost the fund more than the monthly administrative fees. You no longer have to choose between people or technology, fees or location, and platform versus potential.
There is no single common denominator or simple equation that allows a manager, weighing multiple proposals, to streamline the selection process. However, today’s fund administrators have devoted substantial time, money and effort to creating solutions that provide a balanced offering to aid in the decision-making process.
For most investment managers, a fund administrator represents the missing piece of the puzzle that brings everything together from best practices to operating efficiencies. Therefore, finding a service provider that emphasises the significance of talented people and aligns with your company’s core values, while maintaining a balance between price and technology, is an important and often underestimated challenge.
With guidance and due diligence, the search for an administrator can result in identifying many qualified providers that meet your requirements and add additional value to your business.
Choosing a partner
Today, alternative investment managers should be able to rely on their service partner or administrator to maintain the security and integrity of the data they are entrusted with, and to foster a relationship around core expectations. Administrators who recognise the unique needs of every client and understand that performance metrics, service level standards and initiatives should maximise value and enhance the client’s experience are often recognised as industry leaders and should be strongly considered as partners. Your service partner should strive to be a true extension of your organisation while offering the functional and technical expertise that is required for your fund, regardless of the complexity of the needs.
Administrators who are focused on people typically offer a business model that can be tailored and offer consultative services, through which they provide their industry experience to assist clients with all types of business and product design support. Firms who are committed to leading the industry in either mutual fund or alternative investment services, and focus on innovative technology and knowledgeable, customer-focused professionals, will most likely offer the broadest range of top-quality services. Additionally, administrators should be flexible enough to customise their service model to meet your specific needs.
"While pricing can seem like the common thread when reviewing multiple provider proposals, it is rarely predictive of the value received in return."
Another important consideration when choosing an administrator is how often they are recognised for client service, whether through industry accolades or client recommendations. Providers should welcome feedback, and have a service team dedicated to your location to monitor your relationship, facilitate ongoing communication, and provide guidance as your business grows. Do not hesitate to call upon many of the administrator’s current clients for references. Most references will provide honest and constructive feedback that you can rely on.
Not just the cost
A common mistake many managers make is basing their decision solely on price. While pricing can seem like the common thread when reviewing multiple provider proposals, it is rarely predictive of the value received in return. Choosing the wrong administrator can ultimately cause you to focus more time and energy monitoring your administrator’s activity, decreasing their value and increasing operational burden.
Back office operations and inadequate technology can deflect a fund manager’s attention from focusing on their own core competencies of generating alpha for their investors. Over the years, managers have openly admitted that their initial decision to pick one service provider over another was incorrectly based on price. Considering the many complications of switching fund administrators, it is extremely important to make the best possible decision at the outset.
Regarding technology, managers often make their selection based upon the visual impact of the demo they receive during the sales process without evaluating the true substance and the suitability for their fund’s complexity, data transparency needs, investor interface or reporting.
Selecting the provider with a right-sized technology offering and the in-house expertise to properly maintain it will help create an appropriate match between a fund’s needs and a provider’s platform. Building a partnership with an administrator that has a robust and flexible offering, that is scalable and can grow over time and in an ever-changing industry, should be at the top of the list when searching for a third-party provider. Additionally, assess whether your partner has the control consciousness and the financial backing to constantly improve its infrastructure to meet growing business complexities and regulatory changes.
When searching for the right service provider, there should be a balance between the tangibles, such as price and technology, and the intangibles, such as the core values of people, financial strength of the organisation, control environment, and commitment to innovation.
If the key areas of price, people and technology are met, your selection should weigh heavily on your daily contacts with the administration team and your future interactions. These individuals determine the value you perceive and your ultimate satisfaction level. While you cannot buy attention to detail, focus, commitment or flexibility, these characteristics must be embedded in your service team to create the comfort you need to rely on a primary administrator.
Michael Von Bevern is senior managing director and head of US operations, alternative investment solutions, at U.S. Bancorp Fund Services. He can be contacted at: firstname.lastname@example.org
Michael Von Bevern, US Bancorp Fund Services, Technology, Hedge Funds, Cayman Islands