The rise of co-sourcing
As private equity firms scale, how they approach fund administration becomes a strategic operating decision. GPs are navigating more complex fund structures, higher LP expectations, and growing pressure to move faster with fewer internal resources. Against that backdrop, co-sourcing fund administration has emerged as a compelling, but often misunderstood, middle ground between full outsourcing and fully in-house operations.
To unpack why co-sourcing is gaining traction—and when it actually works—we sat down with Jason Haft, Head of US Private Equity Sales at Juniper Square and a 20-year veteran of the private markets. In this Q&A, Haft breaks down the evolution of fund administration models, the technology realities that make or break a co-sourcing strategy, and why many GPs ultimately discover they need more than an administrator.
Q: Is there a shared characteristic of GPs that are asking about co-sourcing (eg, size of firm, complexity of operating model, etc.)? If so, why do you think those firms are exploring a hybrid back office model versus full outsourcing or insourcing of fund administration?
Haft: That’s a good question, and I think it helps to give a little context on how we got here. In the early 2000’s, as private equity really exploded, there was a nearly 50/50 split between firms that implemented software to manage the accounting function in-house and those that outsourced. This really changed after the Great Financial Crisis, when LPs pushed for GPs to outsource as a fundraising requirement. From there, we saw a boom in third-party fund administration and started the shift to where, I would say, the overwhelming majority of firms today are outsourcing their accounting in some fashion.
There was some friction with firms that invested heavily in their own back-office technology but were reluctant to radically change their operating model by switching everything over to the fund admin’s tech stack. To address this, a third method emerged where the GP would hire a fund administrator but have them work within their in-house technology environment. Thus, we saw the rise of co-sourcing.
This method worked well, and still can, given the benefits. A fund operations partner like Juniper Square can plug our people into firms with a strong technology stack and provide value as an administrator across all asset types and fund structures. GPs get independent oversight of their financial records and retain full access to their data to run reports and answer ad hoc questions, without overhauling their internal processes.
Q: You’ve worked with many private equity firms over the years. What makes a co-sourcing model successful, and when is it not right for the GP?
Haft: What we’ve seen work well is when a third-party fund admin can walk into a built-out, fully-realized environment where the systems are seamlessly integrated. This allows the GP to get the full leverage from a great fund administration team.
The challenge is for a newer GP wanting to build out an environment suitable for a co-source arrangement. GPs have to ask themselves, What are the goals I’m ultimately looking to solve? If the answer is better access to data, the second question is: Is the juice worth the squeeze to implement all the necessary systems and ensure data is shared effectively?
If I may, this is a place where Juniper Square shines. Our full set of GPX applications (AI CRM, Data Rooms, Investor Onboarding, Portal, etc.) can be connected and fully resolve data access issues for our clients. But they also work independently and can be plugged into our client’s ecosystem, which offers clients a distinct, perhaps the most flexible co-sourcing model available to the market.
Q: Inherent to the debate between co-sourcing vs. full outsourcing is the internal technology stack. What needs to be true about a GP’s internal technology stack to make co-sourcing fund administration a viable path?
Haft: When you look at private markets technology today, the solutions out there either advertise themselves as an all-in-one play or attempt to have deep capabilities in a subset of functions, all in the interest of a “best of breed” deployment.
With the ostensible all-in-one play, I often hear firms complain that the solutions cover a broad set of functions but lack the deep capabilities needed to handle high- or even moderate-complexity scenarios. With the latter approach, it’s great to have a functional CRM, investor portal, and GL, but if they aren’t connected, you end up having to double-enter activity across all the applications and lose whatever efficiency you should be getting from the technology.
For a co-source model to be successful, you need to have properly connected technology. Otherwise, you'll have a lot of manual work done offline. If you have connected technology that can handle your operations, co-sourcing is absolutely a viable option. That said, in my experience, implementing the right software is hard, and most firms don’t have the time to ensure the vision of connected software is realized. Those firms tend to end up disappointed with their co-sourcing arrangements.
Q. What are the common myths or misconceptions about co-sourcing?
Haft: I think the biggest misconceptions are tied to technology and access to data. GPs assume they’ll have better access to live data if software is kept in-house. The reality is that private equity still predominantly runs on a quarterly close cycle, so even though you can access the data, you aren’t able to really use the data for decision-making or responding to ad-hoc LP inquiries until the books are closed.
The other unspoken part of co-sourcing is that technology providers charge higher subscription fees when they sell directly to a GP versus what they charge an outsourced administrator for the same solutions. So when you hear that technology providers can offer solutions that integrate with existing internal systems (independent of the fund administrator’s technology), the reality is an upfront cost and the ongoing cost of internal technology teams building and maintaining integrations.
The last misconception concerns who actually owns the financial statements. In some instances, we've seen that, due to GP access to the general ledger, the GP will still retain responsibility for the financial statements, with the administrator providing support. For some GPs, this is a feature, not a bug of the arrangement, but for others, this can come as a surprise when they start the evaluation process.
Q: Final question: Make the case for why private equity GPs need a fund operations partner, not just a fund administrator.
Haft: When we go back to the problem statement, what firms are looking for is a tightly connected platform with consistent visibility and access to their data. The frustration with legacy fund administrators has led firms to believe the answer is to own all the technology and bring in an outsourced administrator to manage bookkeeping and investor services. At Juniper Square, we don’t make GPs choose between great technology and great service. We offer both, and everything is connected, which gives our customers a unified system of record for their fund data and an administration team that knows the GP’s business inside and out.
And because we have a robust, connected platform, we can credibly handle the “undifferentiated heavy lifting” of running a fund throughout every fund’s lifecycle. That’s what a fund operations partner can do.