PRIVATE EQUITY: 5 TIPS FOR SUCCESS WHEN APPOINTING A PRIVATE EQUITY FUND
There is a clear and growing trend for private equity firms to outsource their fund administration as the demands of regulators and LPs make it inefficient and impractical for GPs to continue to administer funds in-house. At Centaur, we are seeing first-hand a growing number of private equity managers making the move to administrators with dedicated technology, expertise and infrastructure to deal with the increasing complexity of the private equity fund business. Whether out-sourcing administration for the first time or considering moving to an administrator with more experience and focus on the private equity sector, Centaur shares its best practices for a smooth transition:
1. SERVICE LEVEL GOALS
The first step to an effective administration appointment is to define your objectives and goals. Clear and timely communication is key to addressing potential issues that may arise. At Centaur, dedicated teams are put in place for the on-boarding of each private equity fund client.
2. KNOWLEDGE TRANSFER
It is vital for the administrator to obtain a full understanding of the fund’s existing operations and structure, including all SPVs and co-investment vehicles. Centaur assigns a client service team at this stage, well in advance of the service start-up date. All LP records are checked as part of the on-boarding process. Additional checks are made to identify areas where efficiencies can be made, ultimately leading to better reporting once the administrator appointment goes live.
3. DATA COLLECTION AND INTEGRATION
Fund data may present challenges. Funds store data in different formats, from spreadsheets to complex databases, which the new administrator must collate and integrate into its technology platform. Bringing both financial and non-financial data from disparate sources into a new system can be a mammoth task so it is important for the fund administrator to have robust systems and processes in place.
4. PARALLEL ADMINISTRATION
Operational stability is core to a successful transition service. In the period between contract signing and service start-up, experienced administrators execute a parallel administration service. Appropriate bank accounts are set up, legal documents are reviewed, and relationships are developed and maintained with the fund’s external service providers, such as auditors, lawyers and bankers. These steps ensure greater efficiency and no unnecessary costs down the road.
5. ADMINISTRATION SERVICES GO LIVE
During this final phase of the on-boarding process, systems and processes are tested, accounting records are prepared, and all stakeholders are informed. Once the fund is up and running, Centaur’s on-boarding team continuously anticipates clients’ future requirements and presents ideas in a proactive manner.