The role of fund administration when fundraising gets tough

How does fund administration help ease the challenges when fundraising is difficult?

When fundraising is tough for GPs, our focus as a fund administrator should really be on making our fund managers look as attractive as possible to this scarce pool of investors. While some in our industry will focus on adopting blanket new technology – for example, specific fund accounting or software and reporting products – our priority is to understand the current climate and tailor what we do so that each fund manager can showcase the best versions of themselves.

This can be done across three main areas of fund administration. The first is through investor relations, how we report to investors. Investors want to really feel that they have a reliable partner in their manager, and that the relationship is built through accuracy, efficiency, and timeliness of reports.

Secondly, it’s about flexibility to adapt to what the investors need. In a tough fundraising environment, a one-size-fits-all approach isn't going to work. If a cornerstone investor wants a certain type of report, the fund administrator needs to be flexible enough to work with them on that.

Finally, it’s about efficiency and being able to pass on the benefits of operational improvements to help managers with their underlying IRR.

What new challenges are managers facing now, and how have investor expectations changed?

The biggest challenge for managers today is investor expectations. With a need for managers to differentiate themselves in an increasingly competitive market, it’s easy to believe claims that investors expect AI, real-time access to data, portals, and more. Whilst technology plays its part, I think both managers and fund administrators have the potential to get lost in some of the hype. Instead, I think it’s about looking at what's relevant, what's additive, and what will actually help each manager improve their IRR or efficiency based on their investor base. This is not the time for imposing new technology just for the sake of it.

So, it comes back to being adaptable, proactive, and always being led by the fund managers and the investors, rather than the technology. It’s much more than just thinking: what can we use AI for, and how can we sell it? Often, it’s better to simply ask: what do you need? What do your investors need? How can we get that to market as quickly as possible for you?

Can you discuss the role of fund administration in fundraising for first-time funds versus funds with longstanding relationships?

In today’s climate, it’s important to very carefully differentiate the first-time managers’ needs. Although they’re naturally cost-conscious to begin with, their needs are always unique, and that one-size-fits-all service likely won’t work.

It’s important to understand the kind of offering that will help get their fund off the ground, one that will cover all the regulatory complexity, but be scalable to avoid dragging down their IRR at this stage in their evolution. An existing large, multi-strategy manager will expect the fund administrator to provide their own dedicated team. They'll want to pick up the phone and speak to the same people. Smaller managers don’t need to pay the premium associated with retaining those staff to keep the team stable. And this is where the value of flexible, accretive, add-on services comes in. So, it's not about having an entry level service for a first-time manager and a bells and whistles package for a larger manager, you have to offer almost a menu driven approach so the managers can choose the most appropriate steppingstones to get from one stage of their growth to another.

About
Melanie Herbert is the Regional Head of UK and Ireland for the Institutional Client Services division at JTC Group. Melanie is responsible for ensuring greater connectivity and collaboration across the UK & Ireland within the Institutional Client Services division. JTC Group is a leading global provider of fund, corporate, and private wealth services.

_{This article originally appeared in Service Providers in Alternatives 2024. The opinions and facts included in the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin and Alter Domus accept no liability for any decisions taken in relation to the above.}