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Posted May 6, 2024

Administrator acquisitions: Preparing to switch

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In the first part of this series, we looked at the impact a merger or acquisition at your fund administrator can have on your firm. In the second part, we discussed mitigating any service issues resulting from that merger or acquisition. Hopefully, that’s all you have to read, but if the relationship with your administrator fails to improve, you may have to switch to a new administrator to receive the support and service your fund needs.

These tips are not just good housekeeping, they are steps you can take to prepare for a transition that you’ll (hopefully) only have to do this one time. Your ownership and oversight of the switching process will be invaluable in the long run and set your new fund administrator up as a more valuable partner on day one.

Document everything. Keep thorough records of all communications, meetings, and agreements with your fund administrator. This material can be valuable whenever there’s a change of personnel, process questions, or, in the worst case, disputes. This kind of institutional knowledge–like why an investor transfer was done a particular way or why certain expenses were broken out–will also need to be transferred to your new administrator. The onboarding process is made much easier when everything is documented.

Get full access to your data. Hopefully you haven’t needed to keep shadow books, but in-house versions of the official books and records can be valuable as a backup and for quality review. Remember, even though your administrator has been hired to maintain and update key reports, you are the ultimate owner of the accounting records and have the right to request and examine the data at any point. To minimize any disruption to your operations or LPs, your new fund administrator will need time to sort, clean, and upload your historical data into their system. If that data is incomplete, it will only slow the onboarding process.

Audit security. As mentioned in part 1, appropriate data access controls are essential. If they aren’t in place already, be sure to set them up before separating from your fund administrator and ensure your internal team has full ownership. That way, you can ensure your new fund administrator is given the level of access they need and no other service providers are locked out of key systems at critical moments.

Lean on other experts. Should you require it, you can also enlist the expertise of other service providers to bridge the gap between the old and new fund administrators, including:

  • Legal counsel who specializes in financial services and can provide advice about contractual obligations and disputes.

  • Compliance experts who can help with regulatory compliance, audits, and ongoing monitoring.

  • Independent auditors who will validate a fund’s financial statements and internal controls, maintaining transparency in fund operations.

While switching administrators is not a decision made lightly, ongoing mistakes and service issues can have a major impact on your fund’s operations and reputation. The LPs don’t care if your fund administrator is struggling in the wake of a merger or acquisition. They want their reports on time and their distributions and ownership positions calculated correctly—you’re obligated to provide that to them. You can confidently meet these obligations with a supportive and value-adding fund administrator. Sometimes, that means switching to a new administrator who can offer your fund the support and service it needs.

More than just delivering a list of financial reports, the right fund administrator should create enterprise-building value at the intersection of your finance and investor relations teams, leveraging innovative technology to strengthen partnerships between you and your LPs.

Our guide highlights the four things you need to consider to ensure you find the right administrator and provides probing questions to ask during the vetting process. Download it now and take control of your fund's future.