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Fund administration is not one-size-fits-all for private equity real estate funds

Since fund administrators represent a viable outsourcing solution for fund managers, how does a manager select an advisor?

There are the large administrators that primarily service hedge fund managers who claim to provide services to private equity and real estate managers.

However, these organizations are generally running private equity and real estate firms through a sausage grinder designed for a different fund structure and different investing regimen. The technology platforms and operating structures weren’t built for PE and real estate funds, so the firms must work around the technology to provide an “also does” service.

This “spit and glue” approach fails to take into account the unique requirements of PE and real estate funds, which are unlike the basic GAAP accounting needs for securities based funds.

Real estate investment vehicles generally contain complex waterfall structures for profit sharing related to realized investments. It is important for the administrator to demonstrate their understanding of this complexity up front so there is no confusion as the fund matures about how profits are to be split among the investors and the manager.

The ideal solution is to work with an administrator that has built a technology platform designed specifically to service real estate funds.

Firms like NES Financial offer real estate managers a technology-enabled end-to-end solution for real estate fund managers. In addition to basic accounting functionality, NES Financial offers an investor portal, a manager portal, compliance services that address AML requirements, and other functions to support a manager’s regulatory requirements.

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