80% of alternative asset fund managers that responded to Ocorian’s survey on the provision of third-party fund services in 2023 said that their company uses third-party fund administration. There’s a good reason for that.
In our increasingly complex industry – with a growing regulatory burden – it makes sense for fund managers to allocate fund administration to expert external providers.
What also makes sense is to question regularly whether your external fund administrator is helping or hindering your business – and to think about switching if your answer is the latter. Over 13% of fund managers said that they were expecting to switch to an alternative fund administration provider over the next 18 months.
However, fund managers often fear that switching fund administrators will be time-consuming and complex. The reality is that not switching when a provider no longer meets your needs can be more disruptive than staying put.
The latest Ocorian research data reveals the four main areas where a breakdown of trust prompts fund managers to switch fund administration services.
What are the four main reasons why fund managers want to switch fund administrator?
1. Service levels
Poor service delivery models and lack of delivery against service level agreements (SLAs) combined with offshoring can lead to missed deadlines and poor response rates.
2. Quality of data and reporting
Disparate systems for different jurisdictions and functions, an over-reliance on excel spreadsheets, along with teams that are located in low-cost centres that do not specialise in fund accounting, can lead to data errors and inconsistencies.
Outmoded technology, a lack of automation, reliance on excel spreadsheets and errors therein, over-engineered systems that cannot be easily updated, and multiple systems can make data harder to monitor, interrogate and check.
4. Streamlining complexity
The Ocorian survey shows that a clear majority of fund managers prefer to use one provider for all services, including AIFM, depositary, administration, SPV and corporate services. Increasingly, funds are running across several domiciles and fund managers may not want to work with different teams in different domiciles, so may seek a fund administrator with cross-jurisdictional coverage.
Other reasons fund managers are switching fund administrators include cost (25%) and jurisdictional coverage (19%).
All of these issues can negatively impact investors.
When is it time to switch providers?
Paul Spendiff, Global Head of Business Development, Fund Services at Ocorian says:
“It is quite an unfortunate position for an asset manager to get to a point where they're ready to switch fund services provider. They may have been experiencing service issues for a prolonged period of time, but it's when this has an impact on the investor such as errors in reporting, which is the catalyst that spurs the manager to ultimately move.
Fund managers will often deal with the pain if the pain is only felt by them. As soon as the pain is felt more widely across their investor pool, that's when they decide to take action. Most investors have some other form of onward relationship that they're responsible for so it’s not a decision that the asset manager will take lightly.”
Switching to Ocorian Fund Services
Ocorian has over 30 years of experience in delivering operational excellence across our fund administration, AIFM, accounting and depositary services to the world’s largest institutions along with dynamic start-up fund managers and boutique houses.
We have a strong track record of successful migrations from other fund service providers. In 2022 alone, our onboarding and solutions team successfully completed over 40 migrations from our competitors.
Find out why fund managers are switching their fund administrator to Ocorian. To arrange a call to discuss your requirements, please contact our Fund Services Business Development Team.