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In a recent conversation with Mike Trinkaus, CEO and co-founder of 4Pines Fund Services, one topic kept coming up: Co-sourcing.
This relatively new GP-fund administrator relationship – where a fund administrator manages a GP’s accounting and reporting needs through the GP’s software license – has been making waves in the industry. Many fund managers see it as a win-win – they are able to outsource their back-office workflows while still maintaining control of their data. And, while some fund administrators have been hesitant to embrace it, others like 4Pines see it as an essential next step in fund administration.
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Here are a few of the reasons why, in Trinkaus’s view, co-sourcing is at the heart of the future of fund administration.
“The biggest challenge facing a GP today is data,” Trinkaus says. “For GPs, moving data between service providers, auditors, lawyers, compliance teams and other internal and external stakeholders is a real challenge.”
Co-sourcing, though, takes a significant step out of the data path, thus helping simplify a manager’s data management. By keeping the back-office data within the fund manager’s software system, administrators can help streamline the process and deepen relationships with their clients.
“The biggest challenge facing a GP today is data,” Trinkaus says.
“If I look at data management from the CFO’s perspective,” Trinkaus said, “as a CFO I want to have as much control as I can in the process. And the further I move down the data path, the more challenging it becomes to maintain control. So if I have a fund administrator that is helping me simplify that – that’s a significant benefit. Co-sourcing gives CFO’s what they want – control over their data.”
And, in addition to streamlining processes, there is also the issue of risk management. “A CFO is in the business of managing risk,” Trinkaus says. “It’s a big risk mitigator if you can have data on your side.”
“It’s a big risk mitigator if you can have data on your side.”
One hesitation some fund administrators have about co-sourcing is that it can make it easier for GPs to switch administrators. Because the data stays in-house, the cost and process of switching administrators is easier. But for Trinkaus, that’s the wrong way to think about it.
“We’re not afraid to put co-sourcing out there to our prospective clients because we believe it puts them in a better position for success,” Trinkaus says.
In fact, from 4Pines perspective, co-sourcing is in many ways moving from a nice-to-have to a need-to-have. “If you don’t adopt a co-sourcing platform, especially as a smaller to mid-sized administrator, you are going to run into data challenges.”
As for the risk of clients switching to competitors? Trinkaus believes simplifying data management for their clients will lead to deeper relationships and, therefore, longer lasting ones. “All we have to do is our job,” he says.
“All we have to do is our job.”
Reach out today to learn more about how Allvue helps GPs and fund administrators collaborate more closely through co-sourcing. And read our case study with 4Pines to discover why they’ve built a partnership with Allvue.
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