Independent third-party fund administrators have emerged as a key player in the success of an investment manager’s business model, writes Liezl Gerber, Senior Manager – Global Fund Valuation and Accounting at Maitland.
As the funds industry evolves with increased scrutiny from regulators, investment managers are seeking new ways to diversify portfolios and develop capabilities to stay ahead in an ever-changing landscape.
External pressures to source new deals, increased investor demands, and broader compliance obligations, coupled with internal challenges to optimise back-office operations and reduce costs, have propelled investment managers to recognise the valuable role a third-party service provider can play.
The pandemic has also expedited conversations on third-party fund administration outsourcing. The resilience of organisations has been tested; business continuity plans and operational infrastructures have been challenged; and operating models revaluated to continue business as usual while searching for cost efficiencies.
Many investment managers have moved away from doing everything in-house, realising the value outsourcing can offer, to support their service continuity and not having to bear the burden of technology investment and regulatory compliance. By concentrating solely on revenue generating services, investment managers have freedom to focus their time on core competencies to differentiate value.
Achieving economies of scale
An incorrect fund administration solution can be costly and growth limiting if not correctly executed. Then again, it can be a game-changer if chosen correctly. It can significantly reduce costs and set investment managers apart from competitors. Third-party providers can leverage economies of scale from technology platforms and operational processes already used to control costs, operate more efficiently, and improve quality and accuracy by applying best practices. Maitland is a leader in Robotic Process Automation, further mitigating risk through a reduction in human error and unparalleled integration to drive significant efficiencies.
The role of fund administrators
Fund administrators are service providers and partners that smoothly support the operation of investment managers’ funds. Third-party administrators protect investors’ interests by:
- Independently verifying assets and valuations.
- Maintaining a full book of accounting records, reconciling portfolios to third parties, calculating NAV and fee expense accruals, monitoring bank accounts, and making expense payments.
- Overseeing investor onboarding, processing investor flows in terms of anti-money laundering and compliance requirements, maintaining share registers, and reporting to investors.
- Preparing financial statements, managing audits, arranging director/investor meetings, and filing regulatory reports with authorities.
Benefits of outsourcing
Outsourcing fund administration provides a platform for back- and middle-office services to be managed by a third party. This allows investment managers access to the highest levels of security, transparency, technical expertise, and compliance to address operational risks. These enhanced capabilities using leading technology integrate with their business model.
By outsourcing to a trusted service provider, investment managers can streamline internal operations through tailored solutions that embrace day-to-day complexity to lower costs and concentrate on their high-value activities.
Key outsourcing benefits include:
- Significant cost savings.
- Improving operational efficiencies by saving time – enabling quicker service delivery.
- Flexibility to focus on core competencies to differentiate value.
- Access to advanced and leading technologies.
- Increased independent oversight.
- Access to technical expertise.
- Compliance with regulatory requirements.
- Scaling business to support growth.
Visit www.maitlandgroup.com/fund-services to learn more.
Maitland is licensed as required for the services it offers. Maitland Luxembourg S.A. is licensed as Professional of the Financial Sector (“PSF”) and is regulated by the Commission de Surveillance du Secteur Financier (CSSF). Maitland Luxembourg S.A. holds a “Conseil Economique Licence”. Maitland Group South Africa Limited is an Authorised Financial Services Provider. For further information on the licence permissions applicable to your jurisdiction please visit our website at maitlandgroup.com
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