Fund administration

Fund administration is the name given to the execution of back office activities including fund accounting, financial reporting, net asset value calculation, capital calls, distributions, investor communications and other functions carried out in support of an investment fund, which may take the form of a traditional mutual fund, a hedge fund, a private equity fund, a venture capital fund, a pension fund, a unit trust, or other pooled investment vehicle.

Managers of funds often choose to outsource some or all of these activities to external specialist companies, such as the fund's custodian bank or transfer agent. These companies are known as fund administrators.

Administration services

United States

These administrative activities may include the following administrative functions, which in turn may include "fund accounting" services. Some of these items may be specific to fund operations in the US, and some pertain only whether the fund is an SEC-registered fund:

Calculation of the net asset value ("NAV"), including the calculation of the fund's income and expense accruals and the pricing of securities at current market value, is a core administrator task, because it is the price at which investors buy and sell shares in the fund. This involves trade capture; security valuation (for highly illiquid securities, considerations include whether counterparty valuations are available and/or appropriate and whether the securities can be valued by independent vendors); reconciliations; expense calculation; and NAV calculation and reporting. The accurate and timely calculation of NAV by the administrator is vital.

Preparation of semi-annual and annual reports to shareholders

Maintenance and filing of the fund's financial books and records as the fund accountant, including reconcilement of holdings with custody and broker records

Payment of fund expenses

Settlement of daily purchases and sales of securities, ensuring collection of dividends and interests

Calculation and payment to the transfer agent of dividends and distributions (if required)

Preparation and filing of the fund's prospectus

Preparation and filing of other SEC filings/reports

Calculation of the total returns and other performance measures of the fund

Monitoring investment compliance with SEC, prospectus or U.S. Internal Revenue Code restrictions

Supervision of the orderly liquidation and dissolution of the fund (if required)

This list is not exhaustive, and particularly where a fund manager has chosen to outsource some of these tasks to an external company, some or all of the administrative activities of the fund may or may not be described as "fund administration". Specific activities that definitely do not fall under fund administration are those directly associated with the marketing and development of a collective investment scheme:

Gathering assets (i.e., seeking additional investors into the fund)

Asset management (i.e., deciding how to spend the money that investors have put into the fund in order to obtain the best return for that investment)

In the view of some fund managers, any task necessary for maintenance of the fund that does not fall into one of the two categories above could be classed as fund administration, and could potentially be a candidate for outsourcing.

The 'credit crisis' of the early 2010s had a significant effect on providers of fund administration services.