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1st September 2015

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Investors are more demanding than ever about robust hedge fund reporting and risk management. As a result, the industry has seen Investors raise the due diligence bar with fund administrators.

This summer, Centaur asked Investors to participate in a survey to assess the value they place on fund administrators along with current trends and concerns. See Centaur Survey Report 

We highlight the three most important findings from this survey:

1. Investors place a high value on the importance of the fund administrator role 

88% of Investors interviewed carry out due diligence on fund administrators before investing in a fund. The three most important items on an Investors’ wish list are:

Transparency and Credibility

Investors are looking for a thorough understanding of the administrator’s processes and technology. This transparency in reporting gives investors visibility into their fund investments. Half the investors rated this as their key area of focus.

Technology Platform 

Second on the wish list for investors is robust, proven technology that delivers open, transparent, customizable reporting. A strong control environment is essential with security at its core.

Quality and Continuity of Staff

Investors are looking for experienced staff that can deal with any queries and give them peace of mind that their reports provide a true reflection of a fund’s strategy and performance.

2. Skills and experience deemed more important than brand name or ownership structure 

Investors are not afraid of managers switching administrators. They want the best service and will look for it in all aspects of their investments – they aren’t tied down by old relationships. 94% of respondents have invested in funds that changed administrators in the last 5 years. More than half don’t mind if the administrator is independent or part of a large bank. In fact, only 13% want them to be part of a large institution with 32% preferring an independent firm.

3. Contractual responsibility and poor infrastructure are major concerns for Investors 

69% of participants have decided not to invest in a fund because of concerns about the administrator used. When analysing hedge funds, investors listed the following areas of concern:

Contractual Responsibility

The largest barrier for Investors is administrators’ refusing to accept contractual responsibility for the valuation of fund assets.

Poor Infrastructure

Almost as critical is administrators failing to invest sufficiently in their technology and staff.

Due Diligence Engagement

A third major barrier is caused by administrators failing to engage meaningfully in the investor due diligence process.

Commenting on the survey, Ronan Daly, Founding Partner of Centaur Fund Services says “The results are interesting, but not surprising. Centaur is seeing Investors raise the Due Diligence bar with Fund Administrators. Investor are becoming more proactive in their approach and Due Diligence on administrators has become a crucial part of the investment decision making process.”

He continues, “This is having a positive effect on the industry with the best service providers increasingly emerging as the new market leaders. Centaur responds to their concerns by offering sensible contractual terms and operational excellence backed by an exceptional team.”

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