Although a third-party administrator can take on the function of calculating a hedge or institutional fund’s official Net Asset Value (NAV), it remains the investment manager’s responsibility to investors to verify the portfolio’s numbers. Therefore, over the last 10 years, an increasing number of funds have adopted “shadow accounting” — keeping a complete separate set of fund records for the sole purpose of finding and correcting mistakes — in order to enhance the accuracy and integrity of their data.
Some funds perform shadow accounting in-house, though it can place a significant burden on a fund’s financial, IT, and human resources departments. As a result of that and because of increasing regulations and investor demand for transparency, hiring a third party for this role has become the new industry norm. By outsourcing the shadow accounting responsibility, a fund manager can also focus on important core activities, such as portfolio management, raising capital, and strategic planning.
This “shadow” of your administrator’s reporting offers the important independent verification that investors demand. Ultimus offers a full suite of solutions for shadow accounting, including:
Portfolio accounting for a wide range of fund structures to include standalone, master feeder, side-by-side, fund of funds, and more
NAV reported daily, monthly, quarterly, or annually
Full financial reports and statements
Review of annual audited financial statements once drafted by primary administrator and before submitting to the fund board for review and/or the auditor for review and attestation
Confirmation of management fees and incentive/performance fees
Assessment of subscription documents, confirmation notes, share/unit transfer requests, capital call requests, and redemption requests
Authentication of calculations for fund balances and distributions
Review of anti-money laundering (AML) documents
Review of board presentations
If you choose, Ultimus can also shadow only certain elements of your books and records.
The decision to outsource shadow accounting depends on many factors, including internal resources and investor demand. Contact us to determine if Ultimus’ solution is right for your fund.