Key External Drivers For Outsourcing Fund Administration

In a previous post, we discussed some of the key internal factors that drive outsourcing in fund administration. But there are other reasons why it may be smart to consider third-party administration now rather than later, including increased investor demands, changing regulations, and the new realities of working in the post-COVID era. Let’s examine some of these external drivers for outsourcing fund administration so you can make an informed decision as to whether the time is right for you to make a change.

LP Pressure/Demands

Investor expectations continue to expand, and institutional investors are generally more demanding than private investors. They want customized reports at a moment’s notice, something seasoned third-party administrators are equipped to deliver.

Another main driver on the LP side is the discussion around fees and margins. This encourages managers to look toward outsourcing as a means of cutting costs or structuring costs more efficiently.

Increased Regulations

As a manager, you must adapt to new reporting standards. Changing reporting requirements have significantly increased back-office workloads, and this is doubly true when dealing with institutional investors.

Increased regulation demands increased expertise. Regulatory complexity has had a big impact on outsourcing, and the complexity only increases as funds become global. This complexity also has a direct effect on the cost of compliance. Once again, a focus on value alone encourages managers to outsource.

Lessons Learned from the Pandemic

Our data reports that 45% of managers foresaw a correction in their portfolio performance due to the pandemic. These managers are now focusing on improving infrastructure and operational efficiencies to reduce costs, and in most cases, that means outsourcing.

Another interesting takeaway from the past year has been the risk inherent to offshoring. Those who had spread their administrative workloads across various locales tended to suffer operational breakdowns, and a similar impact occurred in fund operations. Funds who were using multiple service centers around the world tested the infrastructure of some of the largest fund administrators.

So How Do You Efficiently Outsource?

It starts by getting internal consensus, and continues with change management. You need to have clear buy-in from stakeholders, prepare your teams, and understand their needs, which includes taking inventory of the tasks that need outsourcing.

As a leading third-party fund administrator, JTC Americas is able to walk managers through the best practices necessary to determine an optimal strategy for outsourcing so they can get it accomplished sooner rather than later, and without interruption to their operations. 

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Now that you know the external drivers of fund administration, get one step ahead of your competitors by reading the internal factors that drive fund administration!