Alternative fund managers are increasingly turning to third-party suppliers to support their fund management business, according to new research published by Ocorian.
The fund services provider found that 96 per cent of fund managers plan on using external support over the next three years.
The study reveals that the accuracy of data migration, the perception of investors, and impacts on the reporting cycle are the biggest concerns that fund managers have when switching providers.
Despite these concerns, 23 per cent of alternative fund managers are looking to switch fund administration providers over the next 18 months.
More than 13 per cent say they will switch to an alternative third-party service provider, 7 per cent plan to bring it back in-house, and 3 per cent say they will add another third-party service provider.
The main reason behind a provider switch is to improve service levels (75 per cent), followed by improving the quality of data and reporting (69 per cent), better technology (63 per cent) and furthering ESG capabilities (31 per cent).
The research from Ocorian shows that price is the biggest driver for fund managers looking to change providers. This is closely followed by the quality of services and the provider’s overall reputation.
There is currently an equal split between those managing fund administration in-house (40 per cent) and those using a third-party administrator (39 per cent). In addition, 21 per cent say they will use a combination of in-house and third-party administrators at some point in the future.
The survey includes insights from 100 US- and European-based alternative fund managers, working across real estate, private debt, private equity and infrastructure
Paul Spendiff, head of business development, fund services at Ocorian, says: “There is currently a pretty even split between alternative fund managers using third-party administration suppliers and those who manage it in-house, but our research shows a rising trend towards using third-party expertise over the next three years.
“As well as giving managers the time and space to focus on portfolio growth and management, outsourcing fund administration is a cost-efficient option that in practice can still be a natural extension of the internal fund team and operating model, as well as bringing other benefits including best practices and the latest technology.”
