#5 Demystifying Fund Admin (Accounting + Operations)

Find the best fund administration "fit" for your #VC fund

Welcome to the new members of @TheFundCFO crew that have joined in the last week. Thanks for your support and spreading the word! Every week, we’ll bring you actionable tools, real-world experiences, and insider insights for #VC fund managers, #LP investors, and general industry enthusiasts. #OpenLP

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Today’s Top 3:

  • Find the Fund Admin that best fits your firm & investment strategy! See #7 and #8 on our Fund Launch Checklist. Your fund admin (accounting + operations) partner will be an important part of your team and weekly workflows so choose wisely!

  • Ask the right questions. Visualize your ideal working relationship. Ask questions to determine whether they align! We share our list below!

  • Firm is important but so is team. While you’re partnering with a “firm” for support, this is still a service business, and you’ll be relying on a “team” to execute day-to-day.

Fund Administration + Why This Post?

Every week, we’re asked the same question by multiple #VC funds (and other fund strategies). Who do you recommend for fund administration and why?

Let’s step back - why do you need a fund administration provider?

Fund administration is required (almost always) to manage accounting, select operations, and investor reporting. Maintaining accurate books and records may not be the most exciting thing on your to-do list but is important! We’ve advised and helped a number of funds and SPVs in 2021 go through the fund administration selection process.

The industry has evolved over the last decade and there are a number of firms that provide this as an outsourced service. This is typically a “fund expense” (borne by the fund investors, not the management company) and costs can range from $30k-$70k+ (annually), depending by AUM.

Back to the question: who do you recommend for fund administration and why? The answer is that “it depends.”

Each investment firm and investment strategy is different. Certain fund administrators are structured to better support emerging #VC, established #VC, growth, traditional #PE, and other strategies (hedge, liquid, crypto, etc.).

We’re also seeing a mix of technology approaches. Many of the problems they’re solving are service-oriented but we have seen technology gains by certain providers to address certain pain points.

The question is, what’s the best fit for your firm?

A Process for Selecting the Right Fund Admin

As a strategic CFO, we’ve worked with several fund administration providers. Just like us, each one has strengths, weaknesses, and different approaches, so it’s important to do your research to find the right fit for your firm and investment strategy.

We recommend fund managers follow this process:

  1. Reference our list below; visit websites (links included) to understand nuances and each firm’s approach, target clients, and reference clients

  2. Ask other fund managers with similar strategies who they use. What are the positives and negatives?

  3. Ask your key investors who they see funds with similar strategies use

  4. Coverage & team: ask who will be covering your firm and fund day-to-day. What is their typical response time? How many other funds is that team covering? What processes are in place to ensure support in case of team turnover?

  5. Technology & process: what technology and processes are they using? For technology, is there a LP investor portal or is it internal-only? For process, how is ownership and key coverage / deadlines maintained?

  6. Audit & tax integration: have they worked with your audit and tax providers? Will they integrate well in that process? If you don’t have audit & tax yet, who do they recommend and why?

List of Fund Admin Providers

To help with your process, we’ve compiled a list of fund administration providers we’ve worked with and invested behind as both a strategic CFO and LP investor.

They are in alphabetical order and remember, each one is unique, so certain firms will be a better fit than others.

Time and research are required but worth it given it’s a 10-year partnership! We’re happy to share our thoughts on fit for your firm and investment strategy, just ask! In the meantime, here’s the list:

That’s all for today folks! Thanks for your support and spreading the word! Share this on Twitter or LinkedIn to help grow “the crew!”