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Funds Administration Overview

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What is Fund Administration?

Funds Administration is the name given to the set of services provided in support of the running of a fund.

Types of funds include hedge funds, mutual funds, fund of funds, pension funds, unit trusts or other similar structures.

These services are often outsourced by the fund manager to third party companies who specialise in providing these non-core services. These third party companies are commonly known as Fund Administrators.

The Funds Administration Industry refers to the group of companies providing these supportive services.

Below lists some of the services outsourced:
Calculation of the Net Asset Value (NAV)
Preparation of semi-annual and annual accounts
Financial reporting
Maintenance of the fund's financial books and records
Reconciliation of daily and monthly broker statements
Payment of the funds expenses
Pricing the portfolio of the fund
Calculation and payment of dividends and distributions
Provision of compliance and anti-money laundering reporting and monitoring

Typically, fund administration comprises two parts: fund accounting and the activities of registrar/transfer agent. While all of above and below services come under the fund administration umbrella some service providers will split out the below registrar/transfer agent activities:

  • Provision of shareholder services including processing of subscriptions and redemptions to the fund.
  • Maintenance of the funds shareholder register
  • Correspondence with investors such as monthly statement provision, ad hoc notices etc
  • Important! In general there are only two core activities that the Fund Manager undertakes that could not be outsourced to a third party fund administrator:

    1. Portfolio management and investment decision making
    2. Sourcing investors for the fund

    Any service that doesn't fall into above could potentially be outsourced to a fund administrator or similar service provider. This allows the fund manager to concentrate on the areas where they add value i.e. investment decision making and growing the assets of the fund.

    What you've learned in this lesson:

    • definition of Funds Administration
    • who uses Fund Administrators and why?
    • overview of services provided
    • what cannot be outsourced by Fund Managers

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