Article
Five operational best practices for private fund managers to manage costs
April 5, 2022 · Authored by Syed Rizvi
With the regulatory environment becoming increasingly complex for private fund managers over the past decade, the operation and finance functions have increasingly evolved to become value-added functions of a private fund.
Well-designed operation and finance functions can not only keep the private fund safe, but also drive long-term asset growth for the fund. Furthermore, implementing effective operation and finance functions can potentially enhance overall returns for the private fund manager by managing the bottom line of the private fund and potentially increase investor demand for future investments in the fund.
Explore five operational best practices for private fund managers when scaling existing private funds or launching new ones.
Building an effective operation and finance team
A knowledgeable operation and finance team — whether hired internally or outsourced — can help keep the private fund manager from spending time as a project manager and instead focus on fundraising and investing.
An experienced operation and finance team can also help the private fund manager interview and select the right fund administrators, auditors, tax accountants, compliance firms, and other vendors.
Ultimately, the size and depth of an operation and finance team will depend on the needs of a particular private fund, but the long-term benefit of having a team with institutional operational and finance knowledge outweighs the short-term cost of building a team.
Partnering with the right service providers
Similar to the role of a well-functioning operation and finance team, the role of service providers has evolved from simply providing operational and compliance solutions to becoming strategic advisors to private fund managers.
Whether a private fund manager implements a fully outsourced or hybrid operation and finance model, selecting the right service providers that complement the operation and finance team of the private fund and are long-term partners of the private fund manager will be of the utmost significance to the long-term success of a private fund.
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