Clear Signs It’s Time to Switch Fund Administrators

Switching fund administrators is a headache that most fund managers want to avoid. The potential reporting delays, investor disruptions, and NAV calculation mishaps can’t be worth the hassle. But the truth is, as a fund manager, there are some situations you can’t ignore, and switching fund administrators may be much less of a disruption than you assumed. Below are the top seven signs it’s time to consider switching administrators.  

Investor Complaints Are Increasing

Investors expect timely and accurate reporting and communication. When they no longer trust the accuracy of your reporting or fund performance, you’ve got a major problem — it’s difficult to regain investor confidence once it’s lost. And it can have dire consequences for your fund. Famously, the Woodford Equity Income Fund, part of the well-known UK-based Woodford Investment Management firm, failed when the fund was suspended after multiple investors withdrew their money due to lack of confidence, causing massive liquidity issues. Ultimately, the firm and its manager, Neil Woodford, were fined millions of pounds by the UK’s Financial Conduct Authority (FCA) over liquidity mismanagement.

If you’ve received multiple investor complaints over the past quarter regarding reporting or operational issues, that’s a sign that switching administrators may be necessary.

Month-End Closes Take Too Long

If it takes more than a week to receive your month-end NAV calculations, your administrator’s operational processes may need refining. Top fund administrators deliver accurate month-end reports within just a few days of the close of month. NAV Fund Services, for example, provides monthly fund reporting within two working days for 80% of its clients.

Technology Feels Outdated

Ideally, your fund administrator should be constantly updating and improving their technology. If you notice that your administrator’s technology platform feels stale, or fees are increasing for their third-party technology provider, a change may be in order.

If your administrator relies heavily on Excel spreadsheets or can't provide real-time investor portals, they've definitely fallen behind. Modern funds need cloud-based platforms with API connections to support efficient management systems. As digital assets and tokenized funds become more widespread, you want your administrator to be able to keep up with blockchain connections and exchange integration.

Unreliable Customer Service

Dedicated account representatives should resolve issues quickly, within a day or less. If you're leaving voicemails or waiting days for responses, that’s a clear sign your administrator lacks the staffing or processes to serve you properly.

You should have a dedicated account representative or team that is available to answer your questions via phone, email, or through the portal during business hours, and back-up staff to answer questions after hours, on weekends, and during holidays.

Reliable fund administrators should also provide proactive support for your investors, including quick answers to their specific questions and more intensive support for complex issues. Your administrator should respond to your investors promptly, including after business hours and on weekends.

There’s no reason you or your investors should tolerate unsatisfactory or inconsistent customer service.

Costs Don't Match Service Quality

Everyone watches fees, but you don’t want to skimp on your back-end services. NAV calculation corrections, investor complaints, and compliance fixes can cost far more down the line than reasonable up-front administrator fees. If you’re paying low fees but receiving bare-bones service or being charged extra costs for routine services like software upgrades or portal access, that’s a sign you may have outgrown your administrator.

The best administrators charge declining basis points as your assets under management (AUM) grow, reflecting technology efficiencies. Ask for a five-year cost projection based on realistic growth of your fund.

Your Team Spends Too Much Time on Back-Office Work

Fund managers should concentrate primarily on fundraising and investment management, not on administrative reconciliation or formatting reports. Your operations team should not have to constantly manage your administrator. A reliable administrator should reduce your in-house team’s responsibilities, not increase them. Ideally, an admin should take care of back-office processes on a fully independent basis, operating almost invisibly in the background, so that your management team can spend their time on higher-revenue-producing work.

Audit Process Reveals Control Weaknesses

Clean audits are evidence of strong internal controls. A successful audit is a sign to investors that you’re managing the fund well, regardless of your actual investment performance.

Auditors will note errors in your administrator’s reporting or valuation methodologies, a definite negative sign for your investors. If an audit indicates problems caused by your administrator, they can quickly become your problems if investors begin to lose faith in your management skills. A failed audit is among the most frequent reasons managers decide to change fund administrators.

How NAV Makes Switching Painless

NAV Fund Services specializes in administrator transitions, with 40% of our business coming from fund migrations. We manage $450 billion AUA in the private equity, venture capital, hedge fund, and cryptocurrency fund administration sectors and boast a 99% client retention rate. Through our migration process, we have eliminated many of the pitfalls associated with other provider transitions:

• Data transfer: NAV obtains independent access to current accounting data and receives historical data through an interactive portal
• Parallel accounting and reconciliation: Both administrators run in parallel for 60 days, testing and reconciling official records to support current year audit and tax reporting
• Investor communication: Proactive updates maintain confidence
• Dedicated project team: Single point of accountability

NAV is also the only major fund administrator that offers a no-cost trial of our services, so you can see for yourself the type of service and support we provide.

The Cost of Waiting One More Year

While it may be easier in the short run to stay with a suboptimal administrator, think of what you could potentially lose — investors who are frustrated with delayed or inaccurate reports, team morale as your staff juggles more administrative duties than they should, or your firm’s reputation if potential investors begin to question your management ability.

However, the upside of change is faster and more accurate reporting, better investor retention, and more time for you and your staff to devote to investment decisions. While switching may cause short-term disruptions to your operations, most of the time these are much less invasive than firms think, and the benefits are well worth a few weeks of discomfort. If you decide it’s time to make a switch, consider these ten questions to ensure you’re choosing the best administrator for your fund’s needs.