As capital flows into private equity, private debt and real estate funds, investors are continuing to ask for more transparency. While this trend places an additional burden on investment managers, the calls by institutional limited partners (LPs) for improved disclosure into fees, expenses and waterfall calculations presents a new opportunity for fund administrators, which have previously focused primarily on the needs of investment managers or general partners (GP).

After the global financial crisis crippled banks 10 years ago, they were left with impaired loans, resulting in write-downs and diminished regulatory capital. An unexpected consequence has been a difficult financing environment for banks’ traditional customers and the rise of private debt funds.

Large managers are increasingly outsourcing a tailored set of fund administration functions to improve efficiency and control costs. As new regulations and increasingly complex collateral pools have forced hedge fund managers to step up collateral and treasury management activities, so they have turned to fund administrators for assistance.

Funds will gain greater insight into service providers’ controls from May 2017 after an increase in the detail required for SOC 1 reports.