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The bank and fund administrator partnership

For fund managers and promoters, banking and administration are key functions that impact directly on the day-to-day administration of the fund.

For fund managers and promoters, banking and administration are key functions that impact directly on the day-to-day administration of the fund. Often, the service delivery of these providers can make the difference between a successful, well-managed fund – or in the worst case it can undermine investor confidence through poor service levels and a lack of engagement.

A correct approach to this key relationship can deliver tangible benefits for promoters, and indirectly investors, where banks build a business team with expertise in the sector and focus specifically on this market, ensuring understanding of sensitive issues such as critical timelines and processes, especially the operations surrounding the launch of a fund.

The early engagement of banker and administrator is vital in order to clarify timelines and structure and to ascertain the likely requirements for the promoter. A collaborative partnership approach to due diligence can significantly ease the administration burden for clients and save them time when they are more focused on launching their fund – or indeed, as has been the case over the past couple of years, when existing funds are undergoing restructuring.

The bank can support the administrator by ensuring that the electronic banking platforms and basic critical functions such as account opening are fit for purpose, as well as monitoring lending facilities and addressing cross-border foreign exchange and other requirements by engaging specialist expertise in fields such as treasury and capital markets.

The crisis of the past two years has brought the issue of liquidity to the fore, and it remains a big issue within the industry. One of the benefits that banks such as Barclays can offer is the strength of its balance sheet and the availability of capital within it to support structures such as hedge funds, private equity and real estate vehicles.

At all times it’s essential that robust lines of communication are in place between the banking and administration teams. Collaboration on areas such as compliance and due diligence can add huge value to the manager and save time and money for all parties.

The current crisis has thrown up a myriad challenges for fund professionals, including unprecedented levels of redemption requests and the imposition of gates, suspensions and side-pockets, in turn positing risks such as litigation, reputational and regulatory threats.  Over the past two years, working alongside the administrators on distressed structures and investing time at the outset, we have been involved in a number of workout situations, effectively working on behalf of the investor.

In the current environment, it is not enough to play a passive role in this relationship. It is incumbent upon the banking partner to understand the manager’s strategy and the planned marketing and distribution approach of the promoter at the outset in order to be able to support key operational requirements such as hedging share classes or provision of liquidity lines.

Amid changes in the markets and in investor appetite, it’s crucial for the key service providers to maintain their commitment to learning and to take steps to remain close to their clients in order to maintain and enhance these relationships as well as to understand how they can continue to add value. Consistently facing the market, and engaging with managers and promoters as well as other sector professionals, is central to the success of the banker-administrator partnership that is so vital to the fund industry.

Steve McCafferty is head of the Isle of Man intermediary and institutional wealth solutions team at Barclays Wealth.


Please click here to download the full Special Report on The Future of Offshore Funds 2009



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