How do I Choose the Best Hedge Fund Administrator?

In the investment community, creating the right relationships can mean the difference between success and failure. Choosing the best hedge fund administrator is no exception. A hedge fund, which is responsible for investing large sums of money on behalf of wealthy individuals and large financial institutions, relies on its administrator for back-office tasks that influence the firm’s accounting books at the end of the business day. Thankfully, there are several ways that you can find the best hedge fund administrator that go beyond just word-of-mouth recommendations. Among these are using hedge fund marketing firms that will help you choose the best administrator and interviewing potential candidates yourself.

The function of a hedge fund administrator is not to help the investment firm make investment decisions. Those responsibilities are reserved for portfolio managers, but hedge funds also need an administrator just as importantly. This is because this third-party service provider supports the clients, who are investors; helps with administrative and operational tasks; and assists with financial, tax and compliance reporting, the last of which is gaining importance in a financial world that is becoming more regulated. At the end of the day, having a hedge fund administrator in place can save a firm money and avoid costly mistakes that could otherwise cost a hedge fund profits.

There are hedge fund marketing firms that are devoted to helping hedge funds find the right administrator based on certain criteria. These characteristics might include the total value of the assets managed at a hedge fund firm, the number of employees that work there and the amount of clients that the hedge fund engages. An Internet search could direct you to a hedge fund marketing firm that has hedge fund administrators as their own clients. Simply by entering some required information into a database field, you could be matched with a list of options.

Another way to select the appropriate hedge fund administrator for your firm is to do face-to-face interviews with certain candidates. Many of the largest financial institutions have entire divisions dedicated to hedge fund investing, including the administrative support provided by a hedge fund administrator. By contacting these firms after calling some of the largest banks located in key cities such as New York, London or Hong Kong, you can ask to be connected with the proper division and begin to make appointments.

It is always smart to go with a firm that is a household name, but not all hedge fund administrators will be. As a result, it is a good idea not to exclude firms that are unknown to you but instead to call other hedge funds and learn which administrators are widely used in your community. Stick with comparing administrators who service hedge funds that are similar in size and composition to your own.