Why your Operational Strategy Matters
Fund Managers have two primary core competencies: to raise capital and to manage their investment portfolio. However, there are of course, numerous considerations to think about when running an Investment Management firm. Focusing on these two core competencies is vital, but there is a wider business to run and there are significant costs and work that come along with that. Below, I have outlined the areas that are impacted by a Fund Managers operational strategy and how Boldbridge can help you choose and deliver on the right strategy to support your business:
Cost
First and foremost, how a manager chooses to structure their operations impacts costs. If a manager chooses to keep operations in-house, they need to hire the right staff, purchase the right software, and manage the process. Alternatively, the Fund Manager could outsource, making use of an experienced Fund Administrator. The initial cost is lower, since the Fund Manager benefits from the Fund Administrator’s technology, staff, general administrative expertise, and their brand reputation in cases where a fund is looking to demonstrate operational maturity to prospective investors. A manager could also choose a co-sourced strategy, which offers a best-of-both-worlds scenario. The Fund Manager owns certain parts of the operational capacity — such as accounting software, or perhaps a portion of the investor services work — and in return relies on the Fund Administrator to perform certain vital support functions. This allows the Fund Manager to retain some operational expertise and intellectual property, while still getting the benefits of using a Fund Admin. As it relates to cost, depending on the size of the Fund Manager, I may advise different approaches. For a smaller Fund Manager, I would typically advise a staff augmentation strategy, where staff from a consultant or administration company are brought in to set the strategy and project-manage the move to an outsourced, co-sourced, or in-house model. This is a specialty of Boldbridge.
Technology
If a Fund Manager chooses to keep operations in-house, choosing the right tech stack is a significant project, as any platform purchased is likely to impact the operations of future fund launches. Getting it wrong could be costly, as it could lead to large-scale migrations from one platform to another. If a Fund Manager utilizes an outsourced operational strategy, care needs to be taken when choosing an administrator with the right tech stack to meet their needs. Again, if a Fund Manager gets this wrong, they may end up trying to migrate in the future; however, if they get it right, they gain access to a ready-made tech stack and expert staff at a fraction of the price of the licenses. Lastly, if a Fund Manager chooses a co-sourced strategy, they need to ascertain which systems are vital to keep under their own control. I have seen multiple strategies deployed here with varying success; however, my advice has always been to put the investor first and ensure that whatever system interacts with investors is treated as a priority, given its longer-term implications for future fundraises.
Compliance
Compliance with local regulations and legislation is vital for the reputation and future success of a Fund Manager. If a manager chooses to keep this operational necessity in-house, they often build a team around their General Counsel, with highly skilled staff ensuring consistent adherence to regulations. The challenge can arise when Fund Managers expand internationally and new rules and laws come into effect. An outsourcing strategy can be beneficial here, as Global Fund Administrators will have expertise across multiple jurisdictions, along with the technology to support them. Many Fund Managers exercise a co-sourced strategy instead, choosing a few highly experienced staff at the Fund Manager to direct and coordinate specific regulatory filings with experienced legal counsel or Fund Admins. Using an operational consultant like Boldbridge to help identify which filings to keep in-house and which administrators to partner with can be highly beneficial for a growing Fund Manager.
Investor Relations
Looking after your clients is probably the single most important area of any business. In an outsourced model, the Fund Manager passes much of the heavy lifting around investor communications to a Fund Administrator. At times, they can also make use of technology made available by the Fund Administrator for their communications platform; however, many managers choose to own their own license, as the investor platform is so important for future investor relations and often stays in place for future funds. The most common model I have seen is a co-sourced model. This is where the Fund Manager keeps a certain amount of investor communications work in-house but outsources the system security administration and certain access rights to their platform so that the administrator can deliver important reports, drawdown notices, and distribution notices. This complements the other work being completed on the manager’s behalf. Using a company like Boldbridge can help a Fund Manager select the right investor portal, enhancing investor relations, ensuring efficiency, and future-proofing operations ahead of future fund launches.
Scalability
Fund Managers looking to grow fast can look to Fund Admins to help them scale rapidly. More established Fund Admins boast a significant global headcount that can help Fund Managers grow their operations. Again, Fund Managers need to consider their outsourced, co-sourced, or in-house strategies, which may need to be tailored depending on their global footprint or international exposure. Care should be taken, however, as Fund Managers may receive less personal relationship management as their support teams spread over larger jurisdictions. In addition, some Fund Administrators use low-cost jurisdictions to staff their Admin teams, which can support a cost-effective model. Managing quality output in these models is difficult, as relationship managers must coordinate cross-jurisdictionally, across different time zones and cultures, to ensure good-quality output. Fund Managers can also lose touch with who their relationship leads are in models like these, as the number of people involved increases. Boldbridge has significant experience managing cross-jurisdictional models and can help establish policies and procedures for international monitoring, establish administrative KPIs, or even establish operational teams on behalf of the Fund Manager. Our aim is to ensure that the Manager has the right staff available to execute key tasks when they need them.
Separately, I have seen managers execute a venture capital strategy — choosing one or two promising start-up administration firms and investing in them to help them scale alongside their own business. This can be attractive, as the admin firm grows and attracts other forms of business, the manager’s ownership stake also grows, and their own admin costs are offset by capital gains from the investment.
Boldbridge Operational Strategy Checklist
Wherever you are in your fund’s lifecycle, here are the core areas where Boldbridge supports Fund Managers in building the right operational strategy:
Cost — Evaluating in-house, outsourced, and co-sourced models to identify the most cost-effective structure for your fund’s size and stage.
Technology — Selecting and implementing the right tech stack to avoid costly migrations and support future fund launches.
Compliance — Identifying which regulatory filings to retain in-house and which to delegate to trusted administrators or counsel.
Investor Relations — Selecting the right investor portal and communications model to strengthen relationships and future-proof your operations.
Scalability — Establishing policies, KPIs, and operational teams that allow your fund to grow without losing quality or personal relationship management.
In conclusion, selecting the right operational strategy impacts not only a Fund Manager’s business today, but also their business in the future. Selecting the right model is therefore imperative, and Boldbridge can help get this right from day one by working alongside your teams, in your environment, and tailoring specific admin models built around you.