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UMB provides innovative technology plus expert service for private funds

UMB Fund Services offers a complete outsourcing solution for administration, accounting, investor servicing and tax reporting for private equity, private debt, real estate and venture capital funds. Managing Director Kenny Lower chats to Private Equity Wire about some of the current challenges and opportunities  in the private equity sector.

What are the most significant changes – and challenges – in the private equity industry over the past 12 months and looking forward?

On 23 August 2023, the SEC adopted new rules and rule amendments further regulating private fund advisors. These new rules represent a significant change in reporting requirements and slow adoption – or inability to adopt – is not an option for registered investment advisors, as the rules will take effect in 12-18 months.

The new private fund rules require investment advisors to increase transparency and timeliness in their reporting to investors. The rules require timely quarterly statements detailing fund fees, expenses and performance. They also require annual audited financial statements in accordance with existing rules in the Advisers Act rule 206(4)-2, also referred to as the “Custody Rule”.

In addition, the rules prohibit preferential treatment in certain instances and require timely disclosure of preferential rights including reduced fee rates for certain investors.

There are restrictions to specific investment advisor related activities such as the allocation of deal costs related to portfolio investments, reduction of clawbacks for taxes, borrowing from private fund clients, and pass-through of fees related to advisor examinations and investigations.

What are the greatest risks facing both your business and your clients at present?

Information security is a significant risk facing administration business and clients, generally.

We’ve seen phishing attempts designed to locate client and investor bank information. We’ve also seen attempts at identify theft, such as a thief posing as in investment entity in order to procure wires—or as prospective investors in complex cheque kiting schemes. Tight, consistent procedures around the acceptance of investors, maintenance of investor accounts and movement of funds are essential to a secure fund operating environment.

It’s critical to have systems and processes designed to protect the information of investors and ensure the investments within our stewardship are protected through secured correspondence – i.e, through well designed investor portals, as well as strong processes around the distribution of client funds, including processes designed around the collection and maintenance of investor bank information and controls around the mechanics of moving funds out of client bank accounts.

Can you outline the most impactful drivers of client demand in the coming year? 

Timely access to investment and investor data is the most significant driver to client demand. Data needs to be delivered in a manner that’s useful, complete and accurate and in formats that are available to the client.

Data can be transmitted in several forms including via flat files over SFTP or other file transfer sites, through API or via data lakes.



Kenny Lower, CPA, Senior Vice President, Managing Director, AI/Private Equity, UMB Fund Services – As a managing director in UMB Fund Services’ Alternative Investments office in Chadds Ford, Pennsylvania, Kenny manages a team of accountants that provide fund accounting and administration services for a group of alternative investment clients, specifically private equity funds. Before joining the company in 2006, he was a senior audit associate at KPMG LLP, specialising in audits of hedge funds and funds of funds. Kenny has worked in the fund industry since 2004. He earned an MBA from Utah State University and a bachelor’s degree in accounting from Utah Valley University. He is a certified public accountant and a member of the Utah Association of CPAs.

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