Why hire a 3rd party Fund Administrator?
In a field where there is a constant shift in methodologies, reporting standards as well as technology, hiring a private firm that is specialized in Fund Administration to undertake certain tasks, is becoming a norm.
In the recent years more and more hedge funds seek for the help of 3rd party professional fund administration firms to handle some tasks of their operations, so as to achieve stronger efficiencies. A 3rd party Fund Administrator will independently calculate the net asset value, making sure that all transactions that took place are correct. It will also undertake the management of capital calls, the process of allocation and redemption activities, providing a general investor support. Apart from relieving the parties involved from some of their duties there are some more important benefits in outsourcing.
A firm that specializes in Fund Administration will typically be updated about the latest trends regarding the technology involved in this field. Technology offers more efficiency and accuracy as it reduces human error while delivering results at a greater speed. It is important to take into account the safety of the data handled by these technologies, so a high level of security – using data encryption, safe FTP’s, etc – is absolutely necessary. A specialized 3rd party Fund Administrator is typically expected to take all these into account so that operations run flawlessly.
Having an independent party handling operations decreases the chances of conflicting interests between investors, since it allows for more transparency, so as to grant the necessary confidence to all parties.