This article is sponsored by Gen II Fund Services.
Fund managers looking to outsource their management company administration are aware of the volume and complexity of work, and certainly the risks of a missed deadline or an incorrect regulatory filing. Selecting the right administrator to partner with is a critical decision that should be carefully thought through to ensure the product and service offerings match the needs of a GP. Michael Pollack, head of client delivery and innovation at Gen II Fund Services, offers his insights to help GPs discern the best ways to decide on a service provider for their management company.
Once a firm has decided to outsource its management company administration, how should they go about sourcing a service provider?
The next step is to consider the complexities of that management company. Each firm should identify their needs from the functionality, service and connectivity perspectives. There are standard issue tasks, such as quarterly and annual reporting and filing, but it’s important to remember the management company is deeply interconnected with the firm’s fund administration. And this means that the firm’s complexity, in geography, asset classes, investors and volume do impact the management company. We’ve found that it is mutually beneficial for us and our clients when we provide service to both the fund level and management company entities.
How important is the service providers’ geographical location? With the rise of outsourcing to India, do they even need to be in the same country?
We believe that where we’re located matters. Fund managers should ask who is doing the work, and where. We don’t outsource to India or any other country. Offshoring can sometimes offer some price compression, but what’s gained there is often lost in the quality of service.
Additionally, having a provider in a distant time zone can limit the opportunities for collaboration, which is where we feel we add a lot of value. All of our work is done by employees in the US, with offices across the country allowing Gen II to effectively service every US time zone.
Outsourcing always brings up questions of control. How much should GPs expect to control the process when they engage a third party to tackle the administration?
Control is key, especially if a firm has historically handled the books for the management company themselves. They don’t want to lose access to data. And they shouldn’t. We offer
self-service dashboards that grant access 24 hours a day, seven days a week. That’s not to say they don’t have access to staff to answer a question, but that’s in addition to being able to view or download what they need, anytime they need it. And any service provider should offer that.
Outsourcing should never make the GP feel like they’ve been locked out from their data. But I’d also like to add that it’s not enough to merely grant “access” to that data, where clients are left to download massive information extracts that leave them hunting for what they need. “Access” should mean access to information that is necessary in a usable form that can be obtained with ease.
How should a GP evaluate the service provider’s expertise?
They’ll certainly want to know the qualifications of the team, in terms of skillsets and the number of years in the industry, but also gain an understanding of the types of clients they already service. We’ve worked with so many clients of different sizes, strategies and vintages, that we can help that emerging manager predict their needs and meet them in the coming years. Or it’s a veteran firm that never faced a given situation before, but we’ve already managed something similar on behalf of another client and can step in with a solution. It’s not just about expertise; it’s about experience as well. Part of the value of outsourcing is being able to leverage collective intelligence, built over years of service. And that also means selecting a service provider that can service the firm no matter how large or complex it gets over time.
GPs often prize continuity in a service provider’s team, but how can they discern if the team serving them is built to last?
There’s no doubt that continuity is important. The longer a particular individual works on a given account, the more comfortable the client is, and a shorthand is cultivated which makes everything run smoother. And the best way to vet that is by asking the potential service provider what they’re doing to drive retention. How do they cultivate a positive culture that keeps employees engaged? We are very open about our efforts on this front.
“Retention rates at the more senior levels are critical as those are the individuals that have the most direct client interaction and ensure all deliverables are planned and executed properly”
This includes several initiatives, from a client service bootcamp, to continuous training, to our market comp studies that ensure we’re paying our staff in a way that is commensurate with the market, their experience and their skillset. Our belief is that we should never lose people to another administrator. It’s the same client base, the same kind of work, and if we’re losing people, it’s a failure of management and culture. That’s why we make it such a priority, with real focus and investment.
A potential client can hear all about these programs and intentions, but how can they gauge if a provider has a culture that will foster continuity? The truth is that there will always be some turnover among first- and second-year associates as they better define their career objectives. Retention rates at the more senior levels are critical as those are the individuals that have the most direct client interaction and ensure all deliverables are planned and executed properly. The best indicator of future continuity is the retention rates of mid-level and senior personnel.
Attracting, developing and retaining talented individuals is at the top of our priority list. It can be difficult for accountants to grow their careers at GPs, where they can sometimes be viewed as overhead and lack visibility within the organization. We believe we can offer accountants a robust career path where they can continue to learn and grow, experiencing a variety of clients, products and structure without a career ceiling. The ability for continuous learning and growth provides a win-win situation for us, our employees and our clients.
What’s the most important factor in choosing a service provider?
I said before, but I’ll say it again. They have to select a partner that can grow with them, and tackle not just who they are today, but who they aspire to be, five, 10 or even 15 years from now.