Fund administration
Encyclopedia
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; these companies are often known as fund administrators.
These administrative activities would include:
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 business of running a collective investment scheme:
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.
Collective investment scheme
A collective investment scheme is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group...
, whether the scheme is a traditional mutual fund
Mutual fund
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.- Overview :...
, a hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
, 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; these companies are often known as fund administrators.
These administrative activities would include:
- Calculation of the Net asset valueNet asset valueNet asset value is a term used to describe the value of an entity's assets less the value of its liabilities. The term is most commonly used in relation to open-ended or mutual funds because shares of such funds registered with the U.S. Securities and Exchange Commission are redeemed at their net...
including the calculation of the funds income and expense accruals - Preparation of semi-annual and annual accounts
- Maintenance of the fund's financial books and records
- Payment of the funds expenses.
- To reconcile Daily and Monthly Broker Statement
- Settlement of daily Trades, assuring that the proper dividend and interest are received, updating price of securities of client.
- Pricing of Security
- Calculation and payment of dividends and distributions (if required)
- 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 business of running 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.