Changing Your Fund Administrator: Steps and Factors to Consider

While alternative asset managers and their funds engage with various service providers throughout the life of their business, fund administrators provide critical support to the fund’s and the manager’s operations, the fund’s investor base and to the fund’s overall regulatory compliance. The nature of the relationship between a fund administrator and the client is rooted in trust and partnership so having the right fit through the lifecycle of the fund is integral to the success of the fund.

It is thus critical to approach the decision to transition to a new administrator thoughtfully and with the utmost diligence. Detailed below are commonly asked questions and points to consider in the search for a new fund administrator.

Reasons to change fund administrators

There are several reasons that a fund might consider transitioning to a new fund administrator. Funds should take stock periodically of what they need from a third-party administrator and consider how their needs have evolved. Here are some common reasons why a fund may consider changing its fund administrator.

• Expertise: As a manager evolves into new fund strategies or into new jurisdictions, specific expertise on asset classes or jurisdictions may not be provided by their current provider.
• Breadth of services: The suite of fund accounting, investor services, data management and reporting solutions, and compliance and regulatory solutions varies across providers. In addition, certain providers can also provide a broad array of other additional services such as legal and governance services. It is often advantageous for a fund to have a partnership with a provider who can provide a broad range of services in a holistic manner.
• Service levels: Not meeting deadlines or deliverables in service level agreements can mean the difference between efficient operations and investor issues or running up regulatory fines for funds. Having access to a stable service provider who can work collaboratively with the manager to plan deliverables and to produce accurate and timely output is a paramount requirement for funds and managers.
• Technology: A fund may need to avail of a different, more robust technology suite to meet reporting or regulatory requirements. In addition, partnership with a provider who develops custom processes and reporting via their technology suite can support the overall operational processes of the fund.
• Value for money: Funds may seek to change administrators because of fees that do not reflect the workload or service levels. Conversely, some fund administrators may enter the market offering very low fees, with clients discovering the new administrator lacks the experience, team depth or technology for their needs.

What role do investors play in the decision to change fund administrators?

As a firm grows, it invariably gains a more diversified and sophisticated investor base. As such, there are new variables to consider as it relates to engaging service providers.

With this growth, funds structures may need to incorporate more sophisticated investment vehicles. International or non-taxable US-based investors, for example, might need a Cayman Islands, Ireland or Luxembourg-domiciled vehicle. To do so, a firm needs an administrator with the capacity and the experience to handle these various vehicles across jurisdictions, as well as the associated regulatory and compliance expertise.

In addition, more sophisticated investors may require custom reporting or analytics. An administrator with the right expertise and technology can independently produce the required reporting for the investor on behalf of the fund.

What factors should a fund consider in assessing potential new fund administrators?

Fund managers who have not gone through the process of changing fund administrators might second-guess themselves on what factors to consider as they are assessing potential new partners. While the final decision will be highly dependent on how a fund administrator can support a variety of factors, including the fund’s structure, domicile, approach to operations, regulatory requirements and investor needs, there are baseline questions that can be considered:

• How well versed is the firm in certain structures and strategies? Does it have enough knowledge and experience in these areas to add value? What experience does the team have across the fund’s asset classes?
• What is the level of expertise, experience and resiliency within the team to service the fund day to day?
• What is the firm’s culture and values? How is this embedded across the organisation and what does this mean for clients?
• What is the ownership model? Is service delivery expected to be stable or is there the potential for this to be disrupted by M&A activity?
• What is the firm’s global footprint? Are they able to deliver both the local expertise needed with global knowledge that may be needed later?
• What is the service offering of the fund administrator beyond what is required for the fund today? Does the administrator have a track record of being able to develop new services as regulations and the market change?
• What are the firm’s technological capabilities? Does this support the asset classes in the fund’s portfolio? Will this technology also support the fund’s investment and investor relations teams?

An assessment of these factors can help a fund manager determine the best fit as it relates to a fund administrator. Ideally this will be a relationship that can provide the support needed today but will also be able to adapt and evolve in tandem with the fund in the future.

How the Maples Group can support as a fund administrator

The Maples Group’s structure allows us to provide an extensive suite of fund administration and regulatory compliance services for clients that may also include fiduciary and legal services for a tailored suite of products to allow alternative asset management firms to focus on its key strengths. The Maples Group’s full complement of services allows firms to have access to a broad array of services under one roof.