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Posted Feb 27, 2024

What's wrong with the legacy administration model?

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Just as the colossal endeavor of raising a new fund is over, the reality of managing that fund every day for a decade or more—and keeping LPs engaged and satisfied at each step—settles in. While some fund managers have found standout administration partners to help them manage the day-to-day, many still struggle with the operational challenges and lackluster experience that have characterized the legacy fund management model for the last 20 years.

Three significant challenges plague administrators and, in turn, the fund managers they serve.

Disparate systems and siloed data

The siloed workflows and limited focus on financial deliverables, often characterized by legacy administrators, impact the administrator and their GP clients by:

  • Creating churn. Employee turnover, higher prices, and sudden changes in service levels result in a sub-par experience for GPS and make successful fund administration a challenge.

  • Introducing additional risks. Compliance lapses, data breaches and mismanagement, accounting errors, and failure to provide decision-makers critical information create pain points at critical junctures for GPs and their investors.

  • Failing to extend value. Without direct access to partnership data across the entire investment lifecycle, GPs lack the ability to make truly informed business decisions.

A lack of technology and a development mindset

Legacy administrators often excel at cutting costs by cobbling together third-party software. While that can reduce the cost of delivery, this lack of technology and development focus typically results in:

  • An over-dependence on third-party development. The inability to build new solutions in-house also means administrators cede significant control over the evolution of their services to third parties.

  • A stagnant administration experience that will likely look the same in five years as it does today. In a dynamic world where conditions are rapidly evolving, that’s simply unacceptable.

  • Failure to build lasting value for GPs, which, in turn, impacts the value GPs can offer their investors.

Multiple roll-ups and PE buyouts

The administration industry landscape is fraught with roll-ups and buyouts, leaving many administrators to work through mergers or respond to new ownership and forcing GPs to deal with:

  • Disruption to services, data access, and accurate reporting.

  • Stifled innovation that prevents finding new ways to reduce risk, develop cutting-edge technology, boost employee satisfaction, and elevate the investor experience.

  • Slumping quality standards and a lack of agility that’s needed to manage evolving regulations and investor expectations proactively.

Fund administration can be better

The hard truth confronting every firm is how your administrator operates impacts your brand, your reputation, and your internal work teams. Believe it or not, delivering an outstanding LP experience hangs on excellent fund administration. Moreover, keeping internal teams productive and engaged is virtually impossible when the fund administration process and tech stack are muddled, inefficient, and stale.

Despite the challenges of an industry landscape filled with disruption and lackluster fund administration, there’s a better approach to administration—and it’s at your fingertips.

Contrary to the inertia of the legacy model, modern administration pairs dynamic technology with a new set of core beliefs. Beyond mere financial reporting, it delivers enterprise-building value that empowers GPs to impress investors, gain confidence and control, and find more value from their data.

Learn more about what modern fund administration can and should be. Download our latest whitepaper now →