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Concept
Fund administration
Summary
Fund administration is the name given to the execution of back-office activities including fund accounting, financial reporting, net asset value calculation, capital calls, distributions, investor communications and other functions carried out in support of an investment fund, which may take the form of a traditional mutual fund, a hedge fund, a private equity fund, a venture capital fund, a pension fund, a unit trust, or other pooled investment vehicle.
Managers of funds often choose to outsource some or all of these activities to external specialist companies, such as the fund's custodian bank or transfer agent. These companies are known as fund administrators.
These administrative activities may include the following administrative functions, which may include "fund accounting" functions. Some of these items may be specific to fund operations in the US, and some pertain only whether the fund is an SEC-registered fund:
Calculation of the net asset value ("NAV"), including the calculation of the fund's income and expense accruals and the pricing of securities at current market value, is a core administrator task, because it is the price at which investors buy and sell shares in the fund. This involves trade capture; security valuation (for highly illiquid securities, considerations include whether counterparty valuations are available and/or appropriate and whether the securities can be valued by independent vendors); reconciliations; expense calculation; and NAV calculation and reporting. The accurate and timely calculation of NAV by the administrator is vital.
Preparation of semi-annual and annual reports to shareholders
Maintenance and filing of the fund's financial books and records as the fund accountant, including reconcilement of holdings with custody and broker records
Payment of fund expenses
Settlement of daily purchases and sales of securities, ensuring collection of dividends and interests
Calculation and payment to the transfer agent of dividends and distributions (if required)
Preparation and filing of the fund's prospectus
Preparation and filing of other SEC filings/reports
Calculation of the total returns and other performance measures of the fund
Monitoring investment compliance with SEC, prospectus or U.
Official source
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