Outsourcing Fund Administration Creates Greater Efficiency In The Funds Industry

As the funds industry evolves with increased scrutiny from regulators, investment managers are seeking new ways to diversify portfolios, and are developing 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 fastest growing investment managers have moved away from doing everything in-house, realising the value outsourcing has to offer, and focussing on what differentiates their value offer. It is becoming common for investment funds to have a third-party administrator to alleviate pressures for independent NAV calculations and increasing complexity in regulatory and technology requirements.

Shifting priorities

The pandemic caused a global shift to remote working, testing the resilience of organisations. Business continuity plans and operational infrastructures were challenged, and operating models revaluated to continue business as usual while searching for cost efficiencies. This expediated conversations on third-party fund administration outsourcing.

Investment managers with existing third-party administration solutions realised the importance of service provider relationships and the critical role these service providers play in supporting service continuity.

Focussing on core competencies

Investment managers have a broad scope of responsibilities and various priorities. The challenges to run an in-house administration team while delivering on investment management strategy and maintaining investor relations are complex. With pressures on fees, shrinking margins and investor expectations for maximum returns, self-administration is an option. However, the resource-intensive and high-cost technology requirements to build capabilities from scratch and run back-office operations in-house at low costs are far more challenging to implement and scale than outsourcing to an established third-party provider.

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, unparalleled integration, and other significant efficiencies.

 Role and responsibilities of fund administrators

Fund administrators are vital service providers and partners to smoothly support the daily operation of investment managers’ funds.

Third-party fund 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:

1. Significant cost savings
2. Improving operational efficiencies by saving time – enabling quicker service delivery
3. Flexibility to focus on core competencies to differentiate value
4. Access to advanced and leading technologies
5. Increased independent oversight
6. Access to technical expertise
7. Compliance with regulatory requirements
8. Scaling business to support growth

Visit www.maitlandgroup.com/fund-services to learn more.

Maitland Group South Africa Limited is an Authorised Financial Services Provider. For further information on the license permissions applicable to your jurisdiction please visit our website at www.maitlandgroup.com.