At an industry event, JTC’s Senior Director of Business Development, explained why there is no substitute for a fund administrator that understands a manager’s core business.
In January, 2025, Information Management Network held its 21st Annual Winter Forum on Real Estate Opportunity & Private Fund Investing in Laguna Beach, CA. More than 1,200 attendees gathered to discuss the future of the private fund market and forge strategic industry connections.
JTC’s Jeff Drinkwater participated in a panel titled, ‘Assessing the Current Fund Administration & Reporting Landscape.’ Drinkwater and other industry experts discussed how fund administration may evolve over the next few years, covering topics such as artificial intelligence (AI), consolidation vs. specialization, and how the inclusion of retail investors will affect funds’ administration needs.
Changes in Private Equity mean changes in fund administration
These days, any discussion of private funds will invariably involve the topic of retail investors. Funds that have traditionally gone after institutional investors and family offices are now looking to target the “mass affluent” market, including clients of Registered Investment Advisors (RIAs), wealth managers, and broker dealers. There has been plenty of prognostication about how these individual investors will prove to be the next big source of capital.
The panelists eschewed debate over how large this retail demand may be, and focused instead on how this new wave of LPs may affect the fund administration solutions required by fund managers. It is generally understood that retail investors will be investing in smaller amounts, meaning each fund is likely to have a much larger number of LPs. Some on the panel estimated that funds used to working with 100 investors may end up with 2,000 or more. How will that affect administrative needs?
For instance, it may lead to greater reliance on third-party fund administration, since only the largest PE managers have (or can build) the infrastructure required to handle all the data (and data requests) from these LPs. Outsourcing to a third-party fund administrator that has already built out those systems will allow fund managers to utilize best-in-class technology and have a helping hand when it comes to client services. Retail investors may have different expectations when it comes to communication, and it may not be possible to answer questions or requests from all investors all the time. Having a third-party with an easy-to-use investor portal can streamline this communication.
“You think about sub docs,” said Drinkwater, discussing the subscription process, which may involve much more data with an increased number of investors. “How can we make that easier at the LP level, for broker-dealers, RIAs?”
Because of JTC’s experience working with many types of funds, the company already has an onboarding solution that can accommodate a large number of investors.
“Let them just fill out a form, and then it populates right into the actual sub doc,” said Drinkwater. “Then it interfaces into our system.”
The issue of communication will also affect the fundraising phase. It may no longer be practical to personally meet with each targeted investor, making digital communication an important part of the fundraising process. While some fund administrators do not participate at the fundraising stage, those that offer a streamlined experience can help managers stay organized and communicate more effectively.
The panelists stressed that there isn’t a one-size-fits-all solution, and managers attempting to reach the retail market will need an administrator that has already adapted to this market. If the manager wishes to incorporate these investors into different types of funds, whether that is overseas, US-based impact funds, or other specializations, they will need a fund administrator that can handle the unique aspects of those sectors.
While it may be possible to work with different fund administrators for different specialized funds, finding an independent fund administrator that has the capacity to incorporate retail investors, specialization, and multiple fund types, and has the ability to work with the technology that the manager employs will provide flexibility. Every manager has different needs, which is why JTC focuses on understanding our clients’ goals – because there’s no substitute for a personal relationship.
The limits of technology in a sector that demands precision
The panel covered another topic that has been a common theme in the world of private funds: how is technology poised to upend the sector in the coming years? Is it possible that AI could replace fund administrators through automated processes?
The biggest challenge when administering new funds is taking incoming data from a variety of disparate systems and making it fit with the fund administrator’s system and the manager’s GL. The goal is to reduce errors and increase efficiency, but as Drinkwater pointed out, the technology itself is less important than working with experienced individuals who understand where errors commonly occur.
“I think you’re going to hear from any administrator what their ‘tech stack’ is,” he said. “What different systems are you using? Some are internal; some are external. We’re obviously agnostic to the external ones.”
JTC’s data management system is designed to interface with any technology the manager happens to use.
“Consider waterfalls,” said Drinkwater. “If someone is still using Excel, that’s a question everyone should ask their fund administrator. The reason is that 88% of Excel sheets have an error in them. So, if they’re using Excel, that’s a major red flag,” he said.
The panel discussed the possibilities of AI and what it will or won’t be able to accomplish in the next few years. Fund administration might seem like a natural fit for AI in the onboarding and AML/KYC process, but Drinkwater stated that he’s “not sold on it.”
“It’s early days,” he said. “We’ve sampled entering an entire PPM into a secure ChatGPT and asking it to ‘calculate the waterfall.’ While some aspects work, unfortunately others don’t at the moment.”
Any AI system used to automate processes has to be taught to perform specific tasks that are not found anywhere else but the fund world. Since mistakes can lead to catastrophe for fund managers and their investors, the technology simply is not ready to operate without human oversight.
“Everyone says it’s only as good as the data you input, and honestly, there’s just not enough information available,” said Drinkwater. “I’m sure it will become more efficient in the future, but right now, we’re in the AOL/Netscape days.”
Fund managers may be intrigued by a fund administrator offering lower rates by using AI, but unless they have proven it can be done error-free for the exact type of fund you have, you may be offering yourself up as a guinea pig for technology that hasn’t come far enough yet to be trusted.
Finding the right administrator for your fund
Ultimately, the best fund administrator for your fund is one that can provide the exact services you need. As the panelists noted, bespoke functions will be the last ones replaced by AI, and if you can find a fund administrator flexible enough to provide a range of services for different fund types, you can avoid having to switch or work with multiple vendors.
Drinkwater stated: “A good administrator will ask ‘How can we be a partner to you? Where can we make you more efficient, or where can we help you grow and raise capital?’ And that could be in the US, or it could be helping you access Europe. As a global firm, we can help you do that.”
What sets JTC apart from other fund administrators is that we operate in specialized sectors and around the world. JTC offers bespoke fund administration for small and large funds, both in the US and in dozens of other jurisdictions, and can adjust our offerings to meet your specific needs. The future of private funds may not arrive as quickly as some anticipate, but whatever that future may hold for your funds, we can offer the exact services you require to efficiently raise and deploy capital in your chosen market.
Want to learn more about JTC’s fund administration solutions? Contact Jeff directly to book a consultation.
