How Fund Administrators Balance the People-Process-Technology Model to Support Fund Managers
February 06, 2023
By Robert Kahwaty
Growing investor demands around reporting transparency. Ever-tightening reporting deadlines. Contending with AML and KYC processes. Time to focus on your next capital raise. These are just some of the factors that come with managing private capital. If this sounds like some of what you’re dealing with as you manage your private equity real estate funds, it may be time to consider how a fund administrator can help.
In this article, we discuss the role of a fund administrator in an ever-changing landscape of fiscal, technical, and economic forces. We’ll explore the people-process-technology paradigm that has shaped service offerings across leading fund administrators and what we consider to be differentiators of service providers in the space.
Who Are Fund Administrators
Today, fund administrators provide a broad spectrum of services that span back, middle, and front offices – going beyond traditional services of preparing a fund’s books and records. They are true advisors and partners of the clients they serve. Top-tier fund administrators are leaders of technology innovation, they are subject matter experts, and they are savvy business partners to GP’s and LP’s alike.
This wasn’t always the case. Historically, fund administrators were seen as institutions where fund managers could off-load the “dirty work” of preparing a fund’s books and records, freeing up managers to focus on capital raises and investment decisions. And while fund administrators were attracting business, they were deploying armies of human capital to get the job done. Administrators were reluctant to invest in back office operations that did not immediately improve the bottom line and it would be some time before truly integrated systems were developed.
Understanding the People-Process-Technology Model
People. Process. Technology. That’s how fund administrators create success. As competition in the fund administration space grew, fee compression forced administrators to look for ways to improve margins. Two themes emerged:
- A focus on improved efficiency.
- The need for new service offerings.
Technology would be the catalyst to drive change on both fronts.
Today, administrators continue to invest in technology to drive operational efficiency but tech investment also creates service offerings that go beyond traditional administration services. Services now extend into fundraising and deal due-diligence processes. Increasing regulatory scrutiny drives the need for more thorough compliance practices. Institutional limited partners demand more data delivered more quickly. Siloed practices across the formerly fractured back, middle, and front offices have become integrated, creating streamlined processes. All powered by technology.
Technology investment also attracts talent. An increasingly complex technical landscape requires talent. Talent to envision, build, implement, and support. Neither technology nor processes have vision, people do. It’s people that can read the market and look down the road 3-6 months or 2-3 years in order to identify risks and opportunities. It’s people who develop relationships as trusted advisors, as business creators with unique propositions. And it’s people who know how to make tough decisions in dynamic markets that continually test each decision. Top tier fund administrators understand the importance of attracting and retaining top talent – talent that, in turn, understands how to develop and cater service offerings to the unique needs of their clients. Fund administrators that are committed to technology investment know that they are creating attractive places to work that provide opportunities for savvy people to develop smart solutions for a sophisticated client base.
If you’re managing a fund and contending with some of these issues, you may want to think about how a fund administrator can help.