Fund Administration: Outsourced or In-house?

Wondering whether to stay in-house vs outsource your fund administration? If your business is growing  and the existing fund administrative needs are stretching your resources, it might be time to outsource fund administration to seasoned professionals.

Here’s your guide on how to make the “outsource” decision. We’ll cover the basics of fund administration, explain the pros and cons of outsourcing vs. keeping it in-house, and help you make the best decision for your business. 

What is Fund Administration?

First things first, fund administration is the fund accounting, financial reporting and investor communications for private equity and venture capital funds. 

What is In-House Fund Administration?
In-house fund administration means you hire and employ a person — or team — at the company level to handle all the tasks associated with the fund administration. 

What is Outsourced Fund Administration?
Outsourcing fund administration means you hire a third-party service provider to handle back-office tasks for you. 

In-House vs. Outsourced: Things to Consider 

With an in-house team, you might get more oversight and more control however you will typically incur higher costs with this structure. So what do you gain by outsourcing? 

Work Quality/Accuracy/Costs 
Outsourcing will provide more consistent, experienced support. By hiring a seasoned team with a laser focus on quality, you’ll probably see fewer human errors along with a lower cost structure .

Technology
An outsourced company will likely already have the latest accounting and record-keeping technology so you can focus on creating value for your investors.

The Rise of Outsourced Fund Administration

To no one’s surprise fund administration is trending toward outsourcing. That might be due to the increasingly complex and fast-paced world we live in. 

Why Outsource?
Let’s all agree, no one likes to be lost in a wilderness of accounting and reporting requirements. And the truth is, many fund managers are simply inundated with complexity and constantly changing rules. It’s like drinking out of a firehose. 

What Does Outsourcing Look Like?
Outsourcing fund administration works in much the same way as outsourcing your home renovation to an experienced contractor. If you’re going to demo a wall or wire some lights in a home, you want the peace of mind that comes with knowing the job is done right. 
Same thing with outsourcing your fund admin. You’re trusting subject matter experts to handle the tough stuff, the delicate stuff, the stuff that can get you in trouble if you’re not careful and properly trained. 

Pros and Cons
Many times, outsourcing is prefaced with a conversation about size and resources. That’s not a bad thing. But outsourcing is best viewed as an investment in your business growth. And to be sure, there’s a trust factor to consider whenever you work with professionals outside your own business.

On the other hand, think about the time you gain back when you outsource. A good outsourced fund administrator will have existing expertise, training, and technology to hit the ground running without skipping a beat. That allows you to get back to focusing  your time on creating value for your investors.

What’s the Best Option to Grow Your Business? 

Now’s the time to determine the best choice for you and your business needs. If you’re reading this, chances are you’ve thought about outsourcing your fund administration. Consider these things as you make your decision:

Delivering on a Promise
A good outsourced company, just like a good employee, consistently delivers on what they promise. Period. Over time, consistency and trust will help you build a solid working relationship that might even exceed your expectations for your current in-house team. That translates to solid investor value.

Turnkey
When filling an in-house role, you probably look for experience. When looking to outsource, definitely look for that same (or greater!) proven track record, in addition to fully trained people and the latest technology. Those aspects combined will help you reach a high ROI.

Go with the Passionate People
Choosing the right fund admin is so important. We recommend choosing a third-party fund admin with passionate people. They’ll bring the expertise and, the top technology. They’ll be looking to help you plan for your funds future.

If you’re looking to outsource your fund administration to a passionate team, we’re looking for you, too. Our history as a managed services accounting firm allows our team to be much more involved and truly aid in accounting to help with fund administration. Call, email, or drop in to connect with Reliant Fund Services and explore our partnership possibilities.