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Alternative fund managers increasingly turn to third parties for fund administration services

Alternative fund managers increasingly turn to third parties for fund administration services

30 August, 2023
Funds Fund Administration AIFM

96% plan on using a third-party fund administration provider over next three years

Alternative fund managers are increasingly turning to third-party suppliers to support their fund management business, with 96% planning on using external support over the next three years, according to new research from Ocorian, a specialist provider of alternative fund services and global leader in entity administration, fiduciary and compliance solutions.

What are the top three biggest concerns when switching fund administration provider?

The study reveals the top three biggest concerns when it comes to switching provider, which are how quickly and accurately data can be migrated, the perception of investors and the market, and the impact this could have on the reporting cycle.

23% looking at switching fund administration provider

Despite these concerns, almost one in four (23%) alternative fund managers are looking at switching fund administration provider over the next 18 months in some way. Of this 23% who are looking to make changes, more than one in eight (13%) will switch to an alternative third-party service provider while 7% plan to bring it back in-house and 3% will add another third-party service provider. For those looking to switch, the top reason given is to improve service levels (75%), followed by improving the quality of data and reporting (69%), better technology (63%) and because of ESG capabilities (31%).

The research from Ocorian, which manages over 15,000 structures on behalf of 6,000+ clients globally, shows that price is the biggest driver (75%) among those who currently use a third-party administrator but are thinking of switching to another provider. This is closely followed by the level of service (67%) and the provider’s overall reputation (50%).

There is currently an equal split between those taking care of fund administration in-house (40%) and those using a third-party administrator (39%). A further 21% use a combination of in-house and third-party administrators. Where alternative fund managers require more than one service, such as AIFM, depositary, administration, SPV and corporate services, seven in ten (68%) say they prefer to use one provider to cover all services. Nearly a third (32%) prefer to use separate providers.

Paul Spendiff, Head of Business Development, Fund Services at Ocorian, said: “There is currently a pretty even split between alternative fund managers using third-party administration suppliers and those who manage it in-house, but our research shows a rising trend towards using third-party expertise over the next three years. As well as giving managers the time and space to focus on portfolio growth and management, outsourcing fund administration is a cost-efficient option that in practice can still be a natural extension of the internal fund team and operating model, as well as bringing other benefits including industry best practices and the latest technology.”

How can Ocorian Fund Services help you?

Ocorian’s fund services team delivers operational excellence across fund administration, AIFM, depositary and accounting services to the world’s largest financial institutions along with dynamic start-up fund managers and boutique houses. Its team of over 300 funds specialists work across all major asset classes of alternative investment funds such as private equity, real estate, infrastructure, debt and venture capital, whilst its specialist Islamic Finance team is a leading provider of Sharia-compliant investment structures.

*Ocorian commissioned independent research company PureProfile to interview 100 alternative fund managers across real estate, private debt, private equity and infrastructure, residing across the UK, US, France, Germany, Netherlands, Sweden, Switzerland, Finland and Norway during April 2023.

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