Fund Administration Key to Trust

Date: Wednesday, January 21, 2009
Author: Marketmediaonline.com

Independent fund administration is key to rebuilding investor trust, confidence and new business for hedge funds worldwide, according to Dermot Butler, Chairman of the Custom House Group.

“In today's new investment environment, more than ever hedge funds and funds-of-funds must have independent outside administrators as a foundation to help rebuild investor confidence and attract new investment capital,” said Mr. Butler.

Fund administrators provide a range of services to funds and fund-of-funds including, inter alia, fund accounting, portfolio valuation, NAV calculation and shareholder (registrar and transfer agency) services as well as anti-money laundering services and reconciliation services and record-keeping functions. It is standard practice among European-based managers and most offshore funds to outsource fund administration to independent third-party providers, either stand alone specialists or administrators that are part of larger financial institutions. In the US, administration is often done in-house, i.e. “self-administered” by the general partner.

In the wake of recent news reports about fund losses and alleged frauds, some of the world's largest investors are threatening to withdraw assets from managers that do not use independent administrators.

“In anything less than an independent fund administration relationship, there is at the very least a perception that a conflict of interest may exist that could prevent objective verification of a fund's investment activities and even the existence of underlying assets in a given fund, let alone an objective and accurate valuation of the fund's assets,” said Mr. Butler. “This perceived conflict may occur when an outside administrator is affiliated with a financial institution, with an investment manager, or when the administrator is associated with a hedge fund itself,” he said.

“As stand-alone companies, independent administrators have no affiliations to any outside financial entities, et ergo, no such conflicts exist,” said Mr. Butler.

About Custom House

In September 2008, the Fund Services business of Equity Trust was merged into Custom House and reorganised under Custom House Global Fund Services Ltd., which is the Maltese-based holding company for the Custom House Group of Companies.

Equity Trust is the largest independent trust company in the world and, prior to the merger, had over 1,000 employees, operating out of 31 offices worldwide.

The primary business of Custom House (www.customhousegroup.com) is the provision of full administrative services to alternative investment and hedge funds. Established in Dublin in 1989, Custom House also operates through offices in Chicago, Curacao, Guernsey, Luxembourg, Malta, The Netherlands and Singapore, with approximately 250 staff worldwide. With $35 billion in assets under administration, the firm provides administration services to more than 200 managers, trading through more than 500 investment funds. Custom House is within the first quartile for alternative investment fund administrators globally and is among the top independent administrators specializing in hedge funds and funds-of-funds.