As the industry evolves, the need for more efficient and transparent partnerships between General Partners (GP) and fund administrators is becoming increasingly important. Engaging an experienced fund administrator offers significant benefits to a private investment firm, including expertise in fund accounting and operations, as well as access to leading technology. However, partnerships require careful coordination to clearly define roles and responsibilities, streamline communication, and establish timelines. By strengthening middle and back-office operations, a collaboration allows the GP to focus on its core mission: finding, investing in, and growing promising private assets.
Defining Roles and Responsibilities
In a typical outsourced back-office engagement, the fund administrator handles accounting, record-keeping, and reporting, while other key responsibilities are managed by the GP’s Chief Financial Officer or Controller. As fund administrators expand their offerings, other fund operations areas, such as regulatory compliance, may be outsourced. However, many strategic decisions will remain outside the scope of the fund administrator’s role. Therefore, it is crucial for the GP and the fund administrator to clearly define each party’s roles and responsibilities from the start. Clarity helps prevent misunderstandings and ensures that each party focuses on its core strengths and responsibilities.
For example, GPs are responsible for establishing the capital call process. When funding a deal, GPs typically call capital from their investors ten days before the deal closes. Calling capital too late can lead to losing the deal, penalties for delaying the closing, or damage to the firm’s reputation. Conversely, calling capital too early can negatively impact the internal rate of return (IRR).
GPs need to develop a clear strategy for capital calls and other key strategic areas and clearly communicate them to the fund administrator. While fund administrators can provide insight into industry best practices, they cannot create firm policies.
Setting the Stage for a Successful Partnership
As an extension of the firm, the fund administrator and the GP must establish a collaborative relationship. Conversations about processes and timelines should take place in advance of the first reporting period or when a capital call notice needs to be sent. We recommend a shadow period where there is an overlap between the current fund administrator and the new fund administrator. This allows the GP and the new fund administrator to identify areas in need of improvement without compromising the investor experience.
Each relationship is unique, and so is the communication model between a firm and its fund administrator. Some firms may find weekly calls effective, while others prefer a monthly schedule. Establishing the right communication frequency and mode—whether through conference calls, emails, or a portal—will help build a strong, engaged partnership.
Choosing the Right Fund Administration Partner from the Start
The relationship between GPs and fund administrators should be viewed as a long-term partnership. Trust is the foundation of this relationship and is built over time through consistent performance, transparency, and mutual respect. By leveraging the expertise of a fund administrator, GPs can gain the expertise of industry professionals while minimizing personnel costs, utilize leading technology without having to incur the cost of implementing and maintaining complex systems, and focus their attention on value-added tasks that improve performance and strengthen investor relationships. By working together, both the GP and fund administrator can achieve their goals more effectively and create lasting value for investors.