As the investment environment grows more complex, success takes more than just being smart. Fund managers need experienced, top-level support – an administrator with broad resources and flexible solutions to accelerate growth.
We sat down with Dylan Curley, global head of business development for U.S. Bank Global Fund Services, and Brian Bekiers, head of the U.S. alternative investment solutions team for U.S. Bank Global Fund Services, to discuss what qualities promote a strong manager-administrator partnership.
Read their thoughts below.
Q: What are the key elements fund managers should look for in an administrator?
Curley: Managers should evaluate an administrator’s personnel, staff turnover rates and overall commitment to servicing their clients – considerations that, often, don’t get enough attention.
From the administrator’s standpoint, it’s critical to have low staff turnover and to retain a tenured, seasoned team with the credentials to service their clients effectively from the outset. This goes in tandem with location strategy. Managers should ask their potential provider about the location strategy for the business today and into the future.
The client-provider relationship can suffer when the administrator moves office locations or starts offshoring essential functions. For each client, make sure key functions and those with the highest elements of risk (e.g., collateral processing, investor relations and money transfer) aren’t overly functionalized and offshored. When too much of this occurs, it results in a degree of lost control that not all managers find acceptable for their firm.
Bekiers: When I look at our role as an administrator and how we interact with our clients, the first thing that comes to mind is the importance of our people. They’re vital to the process and production of deliverables alongside our clients – we’re truly acting as an extension to our client’s accounting and operational team.
When meeting with various administrators to determine the best option, reviewing the skillset and cultural fit with their people is a key ingredient to a successful partnership with that service provider.
Additionally, it's important to understand what processes an administrator outsources versus handling internally. Complications often increase when key responsibilities are shipped to different time zones. Depending on the fund, asset managers view certain parts of the process as more critical. For example, a traditional private equity (PE) fund might need higher-touch service and a staff that’s more tenured around accounting, as opposed to an operational skillset.
Q: How should you conduct your initial assessment?
Bekiers: Meet the people, starting with the most tenured and experienced. Perform an onsite visit, sit with the prospective service team from that administrator and learn about their service provision by asking them detailed questions. At U.S. Bank, we go the extra step and put together a sample portfolio with sample deliverables, playing through a “day in the life,” using their data to really demonstrate our capabilities.
Curley: We’ve coined this our “proof of concept.” I think it helps a manager get a good sense of whether the provider can handle the requirements of their firm.
Q: How closely should clients look at an administrator’s technology and their deployment of it?
Curley: Right now, it's an exciting time in this business because the funds and their technology are becoming more complex, so it’s definitely something that needs to be focused on.
Bekiers: The technology market itself is very competitive, resulting in major benefits for administrators and other users in the space. Functionality is deployed quicker, performance is better and usability is much greater. It’s a combination of the people, process and technology – and how it all gels together – where clients should focus their attention. You could have a state-of-the-art PE system, but if you don't have the people who understand the complexity of the product types or structure, success is not guaranteed. Search for technology platforms that have flexibility and customization around your strategy and investment types when determining best fit.
Curley: It’s also important to look at how technology is deployed and what controls a provider has around the data, given the rising cybersecurity threats in this area.
Bekiers: For us, we’ve worked to differentiate ourselves in how we use technology related to process flow, data customization and data delivery. Our focus has been on making our data warehouse flexible and accessible to our clients through data customization tools and by offering access in various ways.
Q: What other trends are you seeing in 2019 and what challenges come along with those?
Curley: Private credit has been hot lately. We've seen many private equity managers begin to move down the path of outsourcing fund administration for many of their products. Therefore, we see the continued trend in the outsourcing of private equity and private equity hybrid funds. We’re also seeing more complex clients, with more difficult to service strategies, diversify their administrators, so they can scale appropriately with partners.
Learn how we can help you with your fund servicing needs. Visit us at usbank.com/globalfundservices.