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Welcome to a New Era for Fund Administrators

September 13, 2010

Unquestionably, we are now in a new era for fund administrators. Thanks to the financial crisis of 2008-2009, and the subsequent narrowing of the federal government’s policies and restrictions, the fund administrator has evolved from a behind-the-scenes role into a key contact for counter-party information and multiple set consolidations.

Additionally, the importance of a third party fund administrator has become critical given various scandals at MF Global, Madoff, Ballamor Capital and numerous others. Separating fund investment management from the middle and back office investment operations function is becoming essential for investor confidence and to clearly prove the integrity of fund operations. In many cases this is becoming a requirement.

New changes in the law

New changes in the law now call for new changes in fund administrator reporting. Before Dodd-Frank was signed into law in 2010 to promote financial stability and accountability, fund administrators were traditionally kept in the back, focusing on a firm’s month-end Net Asset Value (“NAV”). Much more expansive reporting and correlated analytic necessities are now squarely in place for fund managers, which call for them to assume a more active role in alternative funds management. Subsequently, the industry is witnessing progress in consolidation, deal making, and product evolution.

Three types of Reporting for Fund Administrators

There are three types of reporting required for fund administrators: Operations & Launch, Manager, and Investor Reporting.

1. Fund Operations & Launch Reporting

The fund services group of a company provides fund administration services for both onshore and offshore accounts. Additional services provided include:

–Preparation of monthly financial statements
–Investor reporting
–Pricing and valuation
–Reference data management
–Preparation of annual financial statements that are compliant (GAAP) following the respective requirements for jurisdictions rules and reporting
–Reconciliation of custodian and broker accounts
–Share Registry / Transfer Agency
–Secure Web based portal

2. Manager Reporting

A Company’s web platform should highlight accurate, fully incorporated reporting across many products and markets, regardless of which custodian or prime broker their clients use. All information must be easily accessible by authorized third parties.

The key benefits provided by our reporting system include:

–Consistency and data integrity throughout all portfolios
–Access to information and delivery via reports and/or data files
–Personalized and branded reports available on STP Portal
–Multi-asset and multi-currency class capability
–Tax lot and transaction level data
–Cash availability at fund and investor levels
–Valuation, Transaction, Performance and Reconcilation Reports
–Financial Statement Reports

3. Investor Reporting

All investor reporting data, including capital statements and fund fact sheets, must be delivered in a timely, secure, and accurate manner. Because scrutiny – and potential for fines and other penalties – is at stake, internal investor reporting systems must be top notch.

CONCLUSION

Due to the immense changes in the law resulting from the financial crisis of 2008-2009, the role of the fund administrator has evolved from its back office origins. Dodd-Frank is in place and the stakes have never been higher in fund administration reporting. Industry developments across market displacements, market regulation, and investor interest and demand have put fund administration reporting at the center of guiding fund managers through their ever-changing operational needs.