Alternative fund managers turn to outsourcing

Alternative fund managers are increasingly outsourcing their fund administration services to third-party providers, with 96% planning to utilise external support over the next three years. This is according to a new study by Ocorian, a global leader in entity administration, fiduciary, and compliance solutions for alternative funds.

The research highlights the growing trend among alternative fund managers to rely on external expertise in fund administration.

This shift comes with challenges, as 23% of the surveyed managers are considering switching their fund administration provider within the next 18 months. Their main concerns revolve around the efficient and accurate migration of data, investor and market perception, and potential impacts on reporting cycles.

Among those considering a switch, 13% intend to transition to alternative third-party service providers, 7% plan to bring administration in-house, and 3% are looking to add additional third-party service providers.

The primary motivations for making this change are to improve service levels (75%), enhance the quality of data and reporting (69%), adopt better technology (63%), and leverage environmental, social, and governance (ESG) capabilities (31%).

Price emerges as the most significant driver for fund managers (75%) already using a third-party administrator who are contemplating a switch. This is closely followed by service quality (67%) and the provider’s overall reputation (50%).

Currently, there is a near-even split between alternative fund managers handling fund administration in-house (40%) and those outsourcing to third-party administrators (39%). Another 21% prefer a combination of both approaches.

When seeking multiple services like an alternative investment fund manager (AIFM), depositary, administration, special purpose vehicle (SPV), and corporate services, 68% of managers prefer a single provider to cover all services, while 32% opt for separate providers.

Paul Spendiff, head of business development: fund services at Ocorian, commented on the findings, stating, “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 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.”

Ocorian’s fund services team offers operational excellence across fund administration, AIFM, depositary, and accounting services, catering to a wide range of financial institutions, including start-up fund managers and boutique houses.

With a team of over 300 specialists, they cover major asset classes of alternative investment funds, including private equity, real estate, infrastructure, debt, venture capital, and Sharia-compliant investment structures through their Islamic Finance team.

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