Pros and Cons of Investment Outsourcing

The Pros and Cons of Investment Outsourcing

There are numerous processes that come with the asset management business and fund administration is not an easy operation to deal with. Fortunately, with the third-party asset management services, it makes any asset manager’s job easier.

In fact, hedge fund managers seeking for a third-party fund administrator has been the norm for decades. Recently, it has also become more common for private equity and real assets managers to utilize fund administrators.

So why are fund administrators increasingly needed nowadays? Reasons for this vary but the pros associated with it are often summarized as follows.

  • A large bench of experienced professionals: Fund administrators alleviate the burden for fund managers such as how to report and cost effectively, ensure data accuracy, and timely delivery of regulatory reporting. Essentially, an experienced fund administrator strengthens and extends the capability of a fund manager’s back office team
  • Attract more investors: Fund administrators provide transparency it drives for all types of asset managers. Managers are able to know what exactly is happening within their funds so that they could attract more investors
  • Top of the line technology: Technology is already a means of differentiation among fund managers, especially among private equity and real estate fund managers. The leading technology solutions that fund administrators offer nowadays can help fund managers implement and manage technology they need

On the other hand, there are also fund managers not believing in fund administrators. Some cons are provided as follows.

  • Loss of control: Some fund managers may feel that they are not able to maintain close relationships with investor base if turn to fund administrators
  • High expense: Hiring a fund administrator can be costly to some small fund managers
  • Clients would not like it: Sometimes the clients prefer not to disclose their personal information to a thirty party

Engaging a third-party fund administrator might not be the right choice for every fund manager, but more and more managers are seeing the value that an administrator can provide in this fast-developing century. Therefore, it becomes essential for an individual fund manager to make the best choice for his own company.