By Chris Rakers

As the impact fund management industry continues to innovate and evolve, the expectations on fund managers are increasing, with investors increasingly demanding accountability for generating and measuring positive social and environmental impacts in addition to financial returns. This evolution has significantly expanded the workload and complexity of an impact fund manager’s responsibilities. Consequently, many fund managers are opting to collaborate with third-party fund administrators to handle their fund accounting, investor reporting, and other operational needs, streamlining the process of managing an investment fund. The rationale for partnering with a fund administrator may seem obvious, as developing an internal team and investing in sophisticated technology can be time-consuming and costly, detracting from a fund manager’s primary focus on impact and financial performance. However, the operational intricacies of managing a fund may not be immediately apparent, especially for burgeoning and nascent entities. Fund managers should consider the following before deciding on your fund’s infrastructure.

• The first and often most important consideration when setting up an investment fund is cost. Partnering with a third-party fund administrator is undoubtedly the most cost-effective decision a fund manager can make. The technology and people required to develop comparable infrastructure to that of a fund administrator are considerable and can take up financial resources and months or even years to build. Fund administrators can offer a “plug and play” solution that leverages the scale and efficiency they gain from working with multiple fund managers.
  
  It is also commonplace for fund administration fees to be passed through to the fund, provided that the fund operating agreement allows for this. Investors are generally comfortable with the practice because it ensures they are getting accurate reporting and on-demand access to their account balances and activity.

• In addition to cost savings, partnering with a fund administrator enables fund managers to leverage institutional-grade infrastructure and elevate their investors’ experience. To compete, fund administrators are investing in best-in-class technology and continuously working to improve the efficiency and accuracy of reporting. Today, most fund administrators have prescribed processes and controls that are developed and reviewed as part of a SOC I/II audit. This provides additional comfort for investors and is often a requirement as part of an investor’s operational due diligence.
  
  The other benefit for a fund’s investors is the enhanced overall experience they gain from a fund administrator. Investors can access key documents like capital call notices, financial statements, and K-1s from a web-based investor portal managed by the fund administrator.

• A third critical consideration for a fund manager is focus. Successful fund management firms should be dedicating their time to managing their investment portfolio, seeking new investment opportunities, and building strong relationships with their investors. Juggling these core activities with the rigors of fund reporting and operations can be distracting and counterproductive. Therefore, fund managers need to decide where to focus their time and energy when managing a fund.

Whether you are raising your first fund or are an established fund manager, your back-office infrastructure is critical to your long-term success. Partnering with the right fund administrator solidifies that infrastructure with a cost-effective solution that enables fund managers to focus on objectives that add the most value to their business.

Broadstreet is a full-service fund administrator dedicated to working with impact, ESG, and other mission-driven funds. We provide fund administration services for more than 150 entities, focusing on balancing high-touch client service with tech-enabled fund operations. Our team of professionals have worked with many funds, helping fund managers navigate through the entire life cycle of their funds. If you’re interested in learning more about how we help fund managers with fund administration, please reach out to Chris Rakers (crakers@broadstreetimpact.com).