Choosing the Right Administrator

Folio primarily operates in the small to medium sized fund market. We assist a variety of clients ranging from single managers and small institutions to family offices. We specialise in the establishment, launch and ongoing administration of an array of investment structures.

We operate in a niche field where our clients often find themselves in unchartered territory. They need their administrator to suggest structuring options and they need us to make the right introductions to suitable brokers, banks, custodians, auditors and lawyers. They are seeking more than NAV calculations and Share Registration. They need a partner that can help them grow and evolve.

So what are the key considerations when you choose an administrator? Fees are always a good place to start. There is no point in paying too much. Contrastingly, if the quote looks too good to be true it usually is. Furthermore, there are now a plethora of basic administrators who maintain back offices in third world countries purely to keep their operating costs to a minimum. This begs the question, what controls do they actually have in place when the work is done thousands of miles away, on a different continent, in a vastly different time zone?

Turning to our business model, Folio only employs qualified accountants and experienced administrators, most of whom are multi-lingual. Why? The answer is simple. We want our staff to interface with our clients and it’s important that they are competent, proficient and communicative. It’s an extra cost but one worth paying. In a global age an administrator that can converse in both English and Spanish can often be invaluable particularly for funds with a global investor base.

Systems and technology are also important factors. Does your administrator still calculate NAVs on Excel and send out contract notes using Word? It’s hard to believe but there are many firms operating on this basis. Not only does this magnify the chance of mistakes it suggests they don’t take their role seriously. It also creates concern that they have neglected compliance and procedures. Clearly, if this is the case, this could be damaging to investors and the reputation of the Investment Manager.

Time zones can be important too. We have chosen to operate mainly out of the British Virgin Islands and Panama. Effectively, we are primarily on East Coast US Time, give or take an hour depending on the season. We have a lot of US based Managers and a lot of Latin investors. Hopefully, the several hours difference to Europe won’t preclude us from capturing many clients from the UK and beyond. Many of our clients are based in Europe so this suggests that some time difference is not a problem. Perhaps, also, it also suggests that our service is effective enough for a limited overlap to work.

In today’s financial world, transparency is key. Investors need assurances that an appointed administrator is competent, accountable, independent and proficient. Folio has been around since 2001. We remain owner-managed and our reputation means everything to us. Acting in the best interests of the investors and safeguarding the assets of the Fund are the two most important functions for a fund director and an administrator. Impartiality is also key. We wouldn’t allow a client to unduly influence us and we would assume our clients would not appoint an administrator that is more worried about its fee than acting in a fit and proper manner.

Administration is not a simple bookkeeping task. It never has been, it never will be. Don’t fall for the trap of choosing an administrator because it is a mandatory requirement. The appointed administrator represents you and their actions directly reflect upon the Investment Manager and should always be deemed as a value-added role. Your administrator needs to understand your goals, time sensitivities, procedures etc. They need to communicate with your investors and take away the administrative burden so the Investment Manager can do what it does best which is to trade and/ or raise capital. Our role is to bring parties together, oversee the completion of KYC checklists, satisfy the due diligence requirements of the other functionaries you choose to appoint and to add gravitas to your organization.

With the aforementioned in mind, when choosing an administrator it is important to ensure that you don’t focus on one single concern or requirement. Focus on a combination of cost, longevity and professionalism.