Fund administration

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Financial administration is the name given to a series of activities undertaken to support the actual process of undertaking a collective investment scheme, whether the scheme is a traditional mutual fund, hedge fund, pension fund, unit trust or something in between.

Fund managers often choose to outsource some or all of these activities to external specialist companies such as cash custodian banks; these companies are often known as fund managers.

These administrative activities may include the following administrative functions which may include the "calculation of funds" function. Some of these items may be specific to finance operations in the US and some only relate to whether they are SEC's registered funds:

The net asset value ("NAV") calculation includes the calculation of fee income and accrual costs and the price of the securities with the current market value
Preparation of semi-annual and annual reports to shareholders
Maintenance and archiving of financial and account books as accountants for funds, including ownership reconciliation with prisoners and broker records
Payment of cost of funds
Daily purchase settlement and securities sales, ensuring dividend and interest collection
Calculations and payments to dividend and distribution transfer agents (if required)
Preparation and submission of the fund prospectus
Prepare and archive other SEC reports/reports
Total refund count and other performance measures from funds
Monitoring investment compliance with SEC, prospectus or limitation of U.S. Internal Income Code
Liquidation of liquidation and the orderly disbursement of funds (if required)

The list is not exhaustive and especially when a fund manager has chosen to outsource some of these tasks to an external company, some or all of the administration's activities may or may not be described as "fund administration". Specific activities that are definitely not included in the name of the administration of funds are those directly related to the marketing and development of a collective investment scheme:

Collect assets (ie find additional investors into funds)
Asset management (ie deciding how to spend money that has been put in by investors to the funds to get the best return for the investment)

In the view of some fund managers, any task required for maintenance of funds that does not fall into one of the above two categories can be classified as a fund administration and potentially a candidate for outsourcing.

The 'credit crisis' at the beginning of 2010 had a significant effect on the Fund Administration service providers.