In a webinar titled “achieving operational Alpha in PE fund administration” on 13 March 2018, hosted by Private Equity Wire in conjunction with Gemini, when asked to an audience of several CFOs of PEs and VCs — IF IT IS ADVANTAGEOUS TO OUTSOURCE THE ADMIN FUNCTION OR TO KEEP IT IN-HOUSE? 96% of them voted YES while 4% voted NO.
CFOs have long been benefited by expert third party fund administrators and advisors. The need for remote experts is growing exponentially thanks to:
– the complex nature of fund structures, – volatile markets, – cut-throat competition, – and frequent regulatory changes
In this article we will discuss the major reasons why Private equity funds and venture capitalists are shifting towards expert third party service providers.
Reducing financial overall costs
To curtail the costs of the overall operation, Private Equity firms are always eager to inculcate new strategies, solutions, and partnerships for their portfolio companies.
To enrich and empower their company portfolio, private equity firms have to transcend the traditional mode of operating — doing everything on their own. Having a team of financial advisors and administrators, who have deep research acumen, are well versed in the current market landscape, and have knowledge of complex fund structures are the need of the hour.
Furthermore, these expert third party administrators and researchers bring more to the table, with lesser resources. “For private equity firms,” Jim Hutter, chief operating officer for JPMorgan says “The cost to attract and retain the right talent can be considerable,” additionally, “this challenge applies to both new private equity firms or those established firms attempting to maintain an existing in-house staff.”
To have various tricks up the sleeves
Head of JPMorgan’s Private Equity Fund Services (PEFS), Robert Caporale says, “It is becoming increasingly difficult for private equity firms to hire fund accountants with relevant and sufficient experience. The skill set is increasingly more expensive and scarce.”
Private Equity operations are generally administered by highly-focused, compact teams. When it comes to Venture Capital teams they are even smaller. All that leads to better confidentiality, quick decision making and lower costs, but it also unfortunately results in a dearth of critical decision making skills and foresightedness. Third-party team of experts mitigates these cons and allow PEs and VCs to bring more skilled individuals on board. With their collective vast experience and innate expertise, these financial organizations are at a way better place to make profound business decisions with lesser resources.
A liberal workforce setup
Expert remote teams allow you more freedom to make decisions when it comes to day-to-day operations. You do not have to follow the rigid rules like when having an in-house team. The reason for that is, these expert teams work and have a plug and play kind of model.
For instance, you may increase the strength of your remote workforce as the need arises and dismantle when the requirement is less. To be more precise, just before an acquisition, can have a higher number of analysts on-board and post investment, when requirement lessens, have a lesser number of analysts.
To get the best of all worlds
With a third party administrator and research team helping you, businesses can have the benefit of increasing all their productivity, customer service, even the ROI by 2x.
A remotely placed team could most possibly be on the other side of the world. This can help you get 24 hours of work-time put in your business.
For instance, teams in the UK and the US can tag the day’s work to the team in India and vice-versa. This not only helps you in getting talent from around the globe, but also set your business up for a 2 times faster growth.
Promotes transparency and trackability
Operations of any financial organization can be quite a hassle if the mandatory regulations aren’t met with diligence.
These regulations are incessantly updating and improving, making it challenging for your accounting staff. It gives them less time to focus on their core task – dealing with the influx of numbers.
Having a third-party service provider allows portfolio companies to compliant with the regulations.
FATCA, AIFMD, and Dodd Frank are only some examples of highly complex regulations that private equity funds have to adhere to.
With the increase in the demand of accurate and transparent reporting growing, specialized knowledge, and dedicated resources for the same are required as well.
This is where expert third-party financial administrators and researchers come into play.
They can help you stay up to date with the legal requirements and regulations. Provide you with timely transparent reports. Eventually, allowing your team to focus on the core business activities.
Strengthen your capabilities with TransForm Solutions. Headquartered in Austin, Texas for 18 years, we have helped CFOs of PEs and VCs across the globe with specialized teams of fund administrators and researchers.
With our expert talent, let us help you transform your business processes through effective strategies and also help you implement them.
Reach out to us on 732 829 6935 or mail us on firstname.lastname@example.org