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Fund Administration

What is Fund Administration?

Fund administration is a common third-party management function for special purpose vehicles (SPVs) or what many refer to simply as “Funds”. An SPV or a Fund, in basic terms, is an entity designed with the purpose of accepting capital from investors and then using those funds for a specified purpose or enterprise. Common examples include private equity funds, real estate funds, venture capital funds etc.

Here are two simple examples:

  1. A real estate developer forms a real estate fund called RE Fund X to accept capital from outside investors and then deploy that capital into a 500 unit hotel project. Once all of the capital is raised, that capital is being held be RE Fund X. The developer then needs to access the capital to pay for the hotel project – i.e. paying contractors, paying for materials, architects, attorneys etc. The fund administrator’s job is to ensure those funds are being properly allocated, released and spent correctly on the subject hotel project.

  2. A venture capital group forms a venture capital fund called VC Fund X. Similar to the above, VC Fund X accepts capital from investors, but, this time the purpose of VC Fund X is to invest in early stage technology companies. Here, the fund administrator may be in charge of ensuring the capital is properly allocated, released and spent on qualifying early-stage companies within VC Fund X’s target class.

Fund administrators serve as a third-party source of integrity while they often also handle much of a Fund’s back-office such as accounting, limited-partner reporting, capital tracking, and capital distributions.

See the Blog article Fund Administration in Action