The Future of Fund Administration is Outsourcing – Not Offshoring
The risks of remote work are steep enough within your own company, whether it’s your son spilling juice on freshly signed documents or cyberthreats amid a pandemic in which attacks have shot up 400%.
But add offshored workers into the mix – in regions perhaps more vulnerable to cyberattacks and less conditioned to remote working conditions – and you’ve got the makings of a severe problem.
Unfortunately, for many fund managers, the rise in remote work brought on by COVID-19 has coincided with a years-long offshoring trend in the fund administration space. Since 2018, for instance, State Street Corporation has cut nearly 3,500 jobs – mainly in the U.S. – while continuing to up its headcount in places like China, India, and Poland.
Outsource to a fund administrator that doesn’t offshore
The drive towards third-party fund administrators came about for a variety of critical reasons, including increased regulation, rising internal costs, advances in technology and growing demand for transparency from investors. In Europe, around 70% of fund managers now use third-party administrators; in the U.S., that number is at about 30% but growing.
Yet outsourcing tasks to a third-party administrator isn’t the same thing as outsourcing tasks to a third-party administrator who then offshores those tasks to workers in lower-cost areas. The supply chain risks of doing so have been thrown into focus by COVID-19 and the large-scale shift to remote work.
What fund managers should look for in a third-party administrator
In contrast to the risks of offshoring, the benefits of outsourcing are clear: namely, that with the right technology platform, a third party can seamlessly adapt to the needs of a given fund in real-time – no matter what its size, or whether it needs scaling up or down.
Additionally, fund managers should look for a third-party administrator who provides:
- Total transparency. At JTC Americas, Formerly NES Financial, our investor portal offers 24/7 access to the progress, investment performance and (when applicable) the social impact of your fund’s projects.
- More efficiency. The right technology platform should be a one-stop-shop, providing scalable solutions, real-time NAV calculations, built-in compliance and accounting functions, automated reporting capabilities, and high-performance document management.
- First-rate cybersecurity. All employee computer systems should be equipped with a secure VPN to ensure the digital protection of all data. Keeping your data – and that of your investors – secure means using a third-party administrator who knows how to protect it against cyberattacks or accidental loss; create backups of your systems; and securely house, duplicate, and encrypt those backups.
- A global reach. As third-party fund administration grows in popularity, we should expect continued consolidation in the space. Maintaining efficiency, transparency and security as fund administrators grow is vital – and another reason why a robust tech platform (instead of additional offshore employees) can be an invaluable asset.
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