What is a Fund Administrator?
In our observation, fund administration has different definitions to different people. At Nottingham, we view administration in a broader sense. A fund administrator oversees the day to day operations of a pooled investment fund so the portfolio manager or program sponsor can focus their energy on making investment decisions.
Although the concept is straightforward, fund administration includes many moving pieces and tasks. Some funds do not require all the services and functions.
What Does a Fund Administrator Do?
A fund administrator will, understandably, deal with a number of different processes and functions. For a closer look at fund administration services, here’s a brief overview of what we do:
- Net Asset Value (NAV) calculation on a daily, weekly, and monthly basis
- Financial reporting
- Preparation and audit of financial statements
- Shareholder reporting
- Regulatory filings
A common denominator for almost all investment pools is calculating the net asset value. As a fund accountant, a fund administrator will verify assets, update market prices, and post income and expenses of the fund. Investment securities prices are usually updated each business day, as are operating expenses and investment income.
Funds are usually audited annually, and many are required to file period financial statements. Financial reporting is, therefore, a vital component of the fund administration services.
Fund Administrator Services
At Nottingham, we help investment funds save on their annual fund administration expense by preparing draft financial statements and utilizing our three decades of expertise to make the independent auditor’s job easier and reduce the cost of an annual audit.
Fund administration almost always includes shareholder recordkeeping as a transfer agent or participant recordkeeping for private funds. After the fund administrator calculates the net asset value, the NAV is allocated to shareholders as the value for each of their shares or allocated to participants as their percentage of the fund value.
The legal and compliance aspect of fund administration is more of an issue for registered investment funds, mutual funds and ETFs. Registered funds must comply with SEC reporting requirements on an annual and semi-annual basis, including updates to the fund prospectus and periodic financial data filings. Many fund administrators also fill the important role of Chief Compliance Officer (“CCO”) for the fund. Nottingham’s in-house legal team of attorneys and paralegals is an integral part of our client’s fund administration.
An administrator can cover everything except investment decisions and the core tasks of gathering assets. By outsourcing and receiving these services from Nottingham, you will benefit in several different ways. You will have more time to focus on other responsibilities, it will reassure investors, and you will receive insight and expertise to help your business run more efficiently.
Catering to Different Fund Structures
There are several different collective investment structures requiring the expertise of a fund administrator. These include:
- ETF fund administration
- Hedge fund administration
- Private equity fund administration
- Mutual fund administration
As one of the top fund administrators in the country, Nottingham understands the divergent complexities between each class. For example, hedge fund administrators perform different services to a private equity fund administrator. There is no static mutual fund accounting definition or hedge fund administrator definition, for instance. A mutual fund administrator will complete different tasks depending on the requirements of the investment manager.
Covering Regulatory Compliance
For any collective investment structure or scheme, there are many areas of compliance that need to be covered. This is particularly true for registered funds that are regulated by the SEC, governed under the Investment Company Act of 1940 and designed to comply with 40 Act fund compliance.
As a core benefit and attribute of 40 Act funds is tax efficiency, each fund is structured to be a pass-through entity for tax purposes. Fund administrators must make annual calculations to ensure that the appropriate distributions to shareholders are made and the proper tax forms are filed to maintain tax efficient compliance.
Navigating the alphabet soup of regulatory agencies, forms, numbered regulations under the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 can be daunting even for professional fund administrators. The Nottingham team has over 30 years of experience working in these areas. We have also developed the relationships necessary to carry out processes efficiently – where neither time nor financial resources are wasted.
Governance Oversight and Support
Whether it’s a board of government functionaries overseeing a local government investment pool, or a board of trustees governing a 40 Act fund, the governance system is imperative for an investment structure. When Nottingham first came into existence back in the 1980s, board agendas and auxiliary materials were much less involved. Now board meeting preparations are more involved, much more lengthy, with more boxes to check to maintain fund compliance.
In 2019 Nottingham was named the best fund administrator for small and startup funds. We view these relationships as partnerships and protect the fund and fund principals the same way we look after our own families.
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