In the increasingly complex landscape of fund administration, investment managers are under growing pressure to provide precise, timely reports while keeping costs in check and complying with extensive regulatory demands.

One solution to these pressures that is gaining traction across the sector is co-sourcing – a hybrid solution that blends in-house capabilities with external expertise. Co-sourcing allows fund managers to maintain control over key activities while leveraging external expertise and resources.

Key benefits of co-sourcing 

A co-sourcing solution is particularly valuable in the complex world of fund administration, where regulatory compliance, reporting standards and operational demands are constantly evolving. Some of the key benefits include:

• Operational efficiency – co-sourcing allows fund managers to tap into the operational expertise of specialised providers while retaining oversight of core activities. This helps streamline back-office functions like accounting, NAV calculations, compliance and investor reporting.

• Cost-effectiveness – by co-sourcing, firms can reduce the overhead of building full in-house teams, while still benefiting from a shared service model. Regulatory expertise – with regulations becoming more stringent (such as FATCA, CRS, and AIFMD), co-sourcing partners offer specialised knowledge and expertise to ensure compliance. Firms can benefit from a co-sourcing partner’s familiarity with complex reporting and filing requirements across different jurisdictions.

• Scalability – co-sourcing offers flexibility, enabling fund managers to scale their operations as needed. This is particularly useful in periods of growth or market expansion, where having an adaptable partner can reduce the friction of adjusting internal processes.
• Focus on core competencies – fund managers can focus on investment strategies and portfolio management, leaving administrative tasks to the co-sourcing partner. This can lead to improved performance by allowing managers to concentrate on what they do best.

Co-sourcing vs outsourcing

While outsourcing involves handing over entire processes to a third party, co-sourcing involves a shared responsibility where both the fund manager and the service provider work in tandem. Co-sourcing offers more control and collaboration compared to traditional outsourcing models, providing greater transparency and adaptability.

Examples of co-sourced services include:

• Fund accounting and reporting
• Regulatory compliance and risk management
• Investor relations and reporting
• Transfer agency services
• Tax compliance and structuring

The co-sourcing model is increasingly being adopted by managers within Private Markets where the complexity of operations and regulations demands both in-house control and external expertise.

How to implement a co-sourcing strategy

To successfully implement a co-sourcing model in fund administration, firms should firstly identify core vs non-core functions. Determine which functions can be effectively managed in-house and which should be co-sourced.  A consultative approach is vital as everyone’s needs will be different.

It is then important to select the right co-sourcing partner. Focus on providers with a proven track record, relevant expertise and a strong understanding of your company’s specific needs. After choosing a partner, effective communication is essential. Establish regular reporting methods to ensure alignment between internal teams and external partners.

Ongoing monitoring of performance and compliance is also essential. Continuous monitoring helps identify areas for improvement and reinforces accountability. Co-sourcing strategies should be flexible and easily adaptable to change as the business needs change or new opportunities for efficiency and innovation arise.

How we can help

As the industry continues to evolve, embracing a co-sourcing model may become essential to remain competitive in the fund administration arena. At Centralis Group we offer co-sourcing services tailored to meet the needs of your company.

Get in touch to find out which co-sourcing solution would provide the most strategic opportunity for you to enhance operational efficiency and manage costs effectively.