Systems functionality from the perspective of a fund administrator

06 Dec 2017

Whilst undoubtedly it is the investment manager of a fund that creates investment performance and is the reason why investors entrust a fund with their hard-earned cash, it is the fund administrator that acts as the operational engine room for the fund.

The administrator is typically required to act as the cog in the fund wheel. This includes interfacing with all the fund counterparties, ensuring that investors are well looked after, safeguarding the fund, its directors and its investors against regulatory risks by ensuring, for example, that anti-money laundering laws and codes of practice are enforced. It includes adapting to ever changing regulation and reporting requirements, not to mention all of its standard responsibilities of acting as company secretary, facilitating board meetings, striking NAVs, subscriptions and redemptions, distributions, financial statements and so the list goes on.

It is worth pausing for a moment and reflecting on these administrator functions, because without a powerful and integrated fund administration system, the administrator will be significantly constrained in meeting even a fraction of these responsibilities in a way that safeguards everyone involved.

What do we mean by “powerful” and “integrated”? To answer this it might be best to describe how a system operates, in very broad and high level terms.

Firstly, the data capture aspect. The old adage of “garbage in, garbage out” still applies. However, if the data is not in the system in the first place then it can’t be extracted, which of course affects the reporting capability. Simple, one might say, but the real challenge is to ensure that the system has the ability to capture all the data that is required across all the counterparties of a fund, all the transactions and relevant information throughout the life of the fund. When thought off in that context, not quite so simple.

Secondly, once the data is in the system, assuming accurately captured and in the right places, the system must have the capability to produce the calculations and seamlessly execute the operational functions. For example, and put very simplistically, calculating a NAV by importing asset prices from an independent, external data source such as Bloomberg, calculating the gross asset value of the fund, utilising the fee module and incorporating all of the accruals to calculate the net asset value. This process could include some rather complex performance fee calculations. The same example could be stated for the dealing function; creating or redeeming shares, creating valuation statements and contract notes and preparing the emailing to investors and their financial advisers, or uploading them to a web portal, all automated and without human intervention.

Thirdly, reporting capability. Historically, most systems of any note could provide the essential reporting functionality such as valuation packs for the investment manager and valuation statements for the investors, to name a few. However, the onset of FATCA and CRS has taken reporting to a new level, now for example, needing to convert data into xml for uploading to government agency web portals, preferably without human intervention or secondary systems.

The modern way is for investors and investment managers to access their fund information whenever it suits them through web portals and not to be overly reliant on the receipt of information by post or email. Online, real time data has become the norm in reporting functionality.

Push-button technology and seamless, integrated interaction between data in different areas of a system are now the order of the day. Different systems for investor administration and asset administration are less effective than an integrated system and only work with interfaces to make these separate systems talk to each other, which in itself requires yet more systems resource and ultimately cost to the end client, not to mention the additional risk of operational failure.

A few other systems considerations to mention: keeping customer due diligence documents up to date is a legal requirement, so consider a fund with 1000+ individual investors, all of whom have provided their passports and proofs of address as required for due diligence purposes. Those passports and address details will go out of date at some stage, in which case the administrator is not permitted to make any payments to those investors. Imagine the workload and risk of missing something if this monitoring of expiry dates is left to human intervention. A powerful system will monitor expiry dates and generate reminders to investors. It sounds simple and obvious, but one will be surprised that not all administration systems do this. There are numerous other such examples. And to complicate matters further, there are significant functionality differences between open (listed securities, hedge) and closed-ended (private equity, property) funds.

In essence there are three main elements that determine a fund administrator’s ability to deliver a quality service:

1. the depth, expertise and experience of its people,

2. the functionality of its system, and importantly,

3. the attitude with which the first two elements are delivered to the client.

On the latter point, ZEDRA is an owner-managed company where every staff member has the opportunity to be a shareholder. This, in itself, facilitates an attitude of caring for each and every client, making sure that they are delighted with our service, safe in the knowledge that we are operating firmly within our regulatory and legal obligations to the fund and to them as clients.

If you would like a demonstration of our system or to discuss any aspect of fund administration, please contact Mike Capraro by email at


Mike Capraro

Head of Business Development Fund Services

T: +441534844221