Processing Knowledge

Investors evaluate mutual funds based on the fund managers who run these funds. Over the years the tons of regulatory work and the increase in analytical activities to counter the turbulence of the stock markets has resulted in stretching the physical limits of these managers. Apart from the analyzing the data, a huge amount of the work related to fetching the data for analysis, preparing the reports for auditors, calculation of the NAV etc., have been considered for outsourcing.  Time is one of the key factors necessary to study and optimize the performance of these funds in the market. Outsourcing, helps these managers to utilize the time lost in administrative tasks and thus visionaries of many financial firms have been considering fund administration as a worthy candidate for outsourcing. However, outsourcing is a double edged sword and care should be taken as the onus of the quality of  ones business falls to a large extent on the firm that takes up this outsourcing job.

Activities involved in Fund Administration:

The main activities involved in the life cycle of the fund are:

• Gathering assets and
• Managing the assets and deciding on how to spend the money.

Many fund managers consider tasks that does not fall into one of the two categories as a candidate for outsourcing. According to an article on wikipedia, “Fund administration is name given to the set of activities that are carried out in support of the actual process of running a collective investment scheme, whether the scheme is a traditional mutual fund, a hedge fund, Pension fund, unit trust or something in between”. Many KPOs such as S.G. Analytics provide the following services with Fund Adminstation:

• Calculation of the Net Asset Value (NAV) including the calculation of the funds income and expense accruals
• Corporate actions and cash reconciliations
• Daily accounting, recording and maintenance of all investment activities including multi currency accounts

The above list is just a summary of the task involved in Fund Adminstration.

Security Issues:

There are a huge number of security issues while outsourcing a financial activity which was summarized neatly in the blog post titled, “Outsourcing Financial Activities”. An important point mentioned by the blogger is, “Security issues are vital and should be given ample thought and time during the discussions. Financial activities form the keystone for the success of a company, hence look out for certification such as ISO 27001″. This certification thus becomes necessary while looking out for candidates worthy of outsourcing any financial activities.