This question comes up periodically, and like the answer to many questions the short answer is “it depends”. From the Nottingham perspective fund administration falls into four functions and responsibilities:
- Fund accounting
- Transfer agency / participant recordkeeping
- Compliance administration and oversight
- Fund operations, cash management, receipts and disbursements, audit
Some funds use multiple vendors for the above functions, in which case the term fund administrator would certainly be narrower. In most such scenarios, the likely outsourcing would be fund accounting or transfer agency / participant recordkeeping or both. The fund administrator in either of those cases would most likely be viewed as the firm that oversaw overall operations, worked with the fund accountant and or transfer agent to compile year end records. On a day to day, month to month basis the fund administrator would be responsible for some or all of the following:
- Fund documents
- Coordination with outside legal counsel
- Coordination with outside audit firm
- Oversight of anti-money laundering (AML) and know your customer (KYC) reviews
- Receive and retain shareholder subscription documentation
- Payment of fund expenses
- Coordination of board meetings and documentation
Sometimes it is just as important to understand what a fund administrator does NOT do, to avoid misperception, or an “I thought that was part of the service” misunderstanding what can leave vital functions unattended if faulty assumptions are allowed to linger.
Fund administrators are NOT:
- legal counsel to the fund – Nottingham has an in-house legal team, as do many administrators, but at Nottingham we stop short of providing legal opinion on fund issues, primarily due to the potential for conflict since Nottingham is also a vendor to the funds we administer. This is a universal issue;
- responsible for investment decisions or transactions – While administrators will typically assist with the monitoring of portfolio investment policies and restrictions, the ultimate responsibility always resides with the investment advisor, not the administrator;
- Financially responsible for fund obligations – Funds are their own entity, and the assets and liabilities of funds are fund assets and obligations to satisfy, not liabilities and obligations of the administrator.
So the short answer to “what does a fund administrator do?” is “it depends”, but the longer answer is that a qualified fund administrator either performs internally, or has relationships to assist the fund, in carrying out all of the day to day operations exclusive of portfolio management. It is a good fund administrators’ goal to allow investment management professionals to focus on their core competency, managing assets, and handling all of the fund details to allow that to happen.