The first of a six-part guide by Dermot S.L. Butler, Chairman of Custom House Administration & Corporate Services Limited (Custom House).
1. What is Administration?
‘Administration’, in the context of Alternative Investment and Hedge Funds means, in effect, the management of the Fund in virtually all aspects of the day-to-day operations of the Fund, except the actual investment of the assets, which is the responsibility of the Investment Manager.
In this role, the Administrator is always answerable to the Board of Directors or Trustees of the Fund and does not have any actual management control.
In simple terms, an Administrator is responsible for ensuring the efficient operation of a fund, whilst at the same time relieving the Investment Manager from having to conduct administrative functions, such as:
- Calculating the NAV and the NAV per share or unit, as often as may be required by the Fund or it’s Board. That may be daily, weekly, monthly or quarterly. Usually Hedge Funds have monthly valuations, however, as institutions become more and more involved in these markets, so does the demand for more frequent valuations;
- Keeping the accounts and financial records;
- Preparing the annual audit file and liaising with the Auditor;
- Liaising with the Investment Advisor, the Custodian, the Brokers and other service providers;
- Liaising with prospective investors and sending out the offering documentation;
- Calculating, confirming and arranging payment of all subscriptions, redemptions, fees and expenses, and arranging for the payment of all dividends or other distributions, if required;
- Maintaining the statutory books and records;
- Often the Administrator will also act as Registrar & Transfer Agent, handling the registration of shares and liaising with shareholders with regard to subscriptions, redemptions and transfers; and
Carry out money laundering due diligence with regard to investors;
- The Administrator may also act as Company Secretary – and will therefore be responsible, amongst other things, for arranging Board Meetings, calling the AGM and preparing Board Minutes.
- The Administrator will maintain a copy of the Share Register at it’s office and, if the Administrator is not resident in the domicile of the Fund, ensure that the original Share Register is held in the Registered Office in that jurisdiction;
- If the shares of the Fund are listed on a Stock Exchange, ensure that the Company and the Directors comply with the ongoing obligations of the relevant Stock Exchange;
- Be the interface between the Manager and Investors;
- Subject to the terms of its contract, the Administrator may also responsible for ensuring that the Fund complies with the terms of its Offering Memorandum in many ways, including the management of it’s investment portfolio with regard to, for instance, investment restrictions and diversification requirements.
This is not an exhaustive list of an Administrator’s duties – but it should give managers a reasonable idea of what is involved.
In summary, an Administrator should be responsible for making sure everything is done to enable the fund to run efficiently in all aspects, except the management of the assets – that is the Investment Manager’s task.
Dermot S.L. Butler is Chairman of Dublin-based Custom House Administration & Corporate Services Limited ("Custom House"), a company that specialises in assisting clients in the organisation, establishment and administration of alternative investment and hedge funds. Custom House is regulated by the Irish Financial Services Regulatory Authority ("IFSRA"), and authorised under Section 10 of the Irish Investment Intermediaries Act, 1995.
Click here for the Hedgeweek Special Report on Dublin Hedge Fund Services