Funds administration refers to the set of services provided in support of the running of a fund. Types of funds include hedge funds, mutual funds, pension funds, unit trusts, and other similar funding structures.
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The way fund administration works is that services get outsourced by the fund manager to third-party companies that specialize in providing these non-core services. These external, specialist firms are commonly known as fund administrators, while the funds administration industry refers to the umbrella group of companies providing these support services.
The administrative functions of fund administrators may include both fund accounting and the job of a registrar or transfer agent. The typical services provided by fund administrators include the calculation of Net Asset Value (NAV), preparation of semi-annual and annual accounts, maintenance of the fund's financial books and records, reconciliation of daily and monthly broker statements, payment of the funds expenses, pricing the portfolio of the fund, calculation and payment of dividends and distributions, and provisions for compliance and anti-money laundering reporting and monitoring.
Functioning primarily as a registrar or transfer agent, a fund administrator works on the provision of shareholder services (including processing of subscriptions and redemptions to the fund), maintenance of the funds shareholder register, and correspondence with investors for monthly statement provisions, ad hoc notices, etc.
Note that generally speaking, there are two core activities that the fund manager undertakes which could not be outsourced to a third-party fund administrator. These are portfolio management or investment decision-making and the sourcing of investors for the fund.
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