Fund administration
Fund administration is the name given to the set of activities that are carried out in support of the actual process of running a collective investment scheme, whether the scheme is a traditional mutual fund, a hedge fund, Pension fund, unit trust or something in between.
Managers of funds often choose to outsource some or all of these activities to external specialist companies such as a fund's custodian bank; these companies are often known as fund administrators.
These administrative activities may include the following administrative functions which may include "fund accounting" functions. 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
- 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 the name of 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.