The Continuing Value of Private Equity Fund Administration

How the right third-party fund administrator can improve investor relations and help with scalability in the long term

The value a third-party fund administrator can provide fund managers at the early stages, such as during the onboarding process, is generally well understood. During the subscription process, documentation and data management are often handed off to experienced fund administrators.

After that, fund managers may think the hard part is done, and that they no longer require the expertise of a third-party FA. What they fail to realize is the long-term value of fund administration, and how it can help managers deal with the changes that come from growth, diversification, and a changing work environment. Here are just a few of the ways the right third-party fund administrator can continue to provide value to private equity managers:

Talent Management

EY recently conducted a survey of executives at private equity and venture capital firms from around the globe. One of the questions asked was, beyond asset growth, what were managers’ top strategic priorities?

Regardless of size, the most popular answer was “Talent management.” Finding the right people can be time consuming, resource heavy, and exceedingly difficult in the current hiring landscape. Experienced staff are in high demand and difficult to come by. Spending time and money on applicant searches can take executives’ attention away from other important priorities.

A third-party administrator can help ease this burden by reducing the need to hire full-time staff for back-office functions. By having a coordinated expert team taking care of a variety of accounting, regulatory, and administrative functions, you can ensure your top-level executives’ time is being spent on raising and deploying capital.

Managers are also now dealing with a post-COVID world, where retaining talent may rely heavily on how the workplace environment changes. Look at how firms anticipate in-person working to adapt in the future, according to EY:

Less than a third of respondents believe they’ll return to a five-day in-person work week. And most believe these changes are here to stay:

It’s clear many in the industry believe remote work isn’t going anywhere. That means any workplace that offers flexibility of location will be able to attract talent better than those that force employees to come to the office every day.

So how do you offer the kind of hybrid work models that are appealing to staff? You’ll need the right technology, including secure data management, such as JTC’s industry-leading technology that provides an institutional-grade general ledger to mitigate operational risk. Our technology can also help meet the demands of another key group: investors.

Investor Relations

At JTC Americas, we use technology to enhance the investor experience and provide them with peace of mind through security and transparency tools that include our “three layers of defense” risk & compliance model, a data loss prevention system, and intrusion protection measures.

JTC also offers our proprietary eSTAC technology platform that provides 24/7 access to portfolio information while protecting user data, and offers institutional-quality reports when investors want them. Once investors have used a platform like ours, anything less isn’t likely to cut it.

A third-party fund administrator can help keep investors happy and inspire repeat business by maintaining satisfaction, important for firms that want to grow and diversify.

Growth and Diversification

While growing managers may start out with a single fund, it’s likely they’ll wish to expand in the future. After all, according to EY, the most common strategic priority after “Talent management” for small and mid-sized firms was “Product/strategy expansion.” Many larger firms have already diversified, and it shows:

Larger firms outpace their smaller counterparts in every category, offering more diverse offerings across the board. If smaller managers wish to one day reach that $15 billion level, diversification will be key. A different kind of fund, such as ESG or Fund of Funds, will have different administrative needs. The broad expertise of a fund administrator like JTC can help you deal with the complications that arise.

As managers expand, they may also wish to fundraise or deploy capital overseas. In order to go from local to global, you need someone with a presence in different jurisdictions. The right administrator will be able to help with all of your funds, not just some of them.

Planning for the Future

Let’s take another look at that list of strategic priorities from EY:

One area where larger firms were way out in front was “ESG initiatives.” That’s because the most successful firms understand that the investors of the future care about both returns and impact, and expect their investments to be able to accomplish both. Any manager looking to grow should take ESG seriously.

This point was summarized perfectly in the EY report: “Strategically thinking through decisions about ESG will continue to be extremely important in order to secure the investors of the future.” You can’t think about fundraising and growth without thinking about ESG, so if your firm lacks expertise in this area, you need a fund administrator who can help.

JTC has been a leader in impact and ESG, and was awarded the top prize in the “Fund Administration: ESG” category at the 2021 Drawdown Awards. We’ve also pioneered the virtual Chief Sustainability Officer and pride ourselves on walking the walk on Impact and ESG in our own practices while helping companies with ESG policies and strategies.

While the right fund administrator can make a big difference in the subscription process, it’s important not to forget the value of a lasting relationship with a trusted partner. JTC Americas offers solutions for fund managers at all stages, so we can help you work toward achieving your ambitious goals.

Together We Grow

Learn more about our PEFA solution by downloading the JTC Private Equity Fund Administration collateral!