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What’s up, everyone? Today, we’re doing a throwback interview and talking about fund administration with Jerry Wright!
Jerry Wright has been working as a fund administrator for over 20 years!
He briefly introduced himself and his career…
Jerry Wright
I started off as an administrator at J.D. Clark for 14 years and became partner shortly before selling to UMB.
I knew 3 of Strata’s founders, and I had always wanted to work there.
Strata Fund Solutions is a full-service administration company in the alternative assets industry.
Strata hired me and I have been working there for over 4 years.
Fund Admin
Bridger: What’s the purpose of a fund administrator and why would fund managers want to hire them?
Jerry: When people give their money to a fund for 7 years, they will want to know the details.
There have been countless ponzi schemes over the years, and no one wants to be scammed.
For that reason, admin sends out monthly or quarterly capital statements, showing exact progress on the investors’ capital.
They also coordinate with the treasury to make sure all transactions are regulated according to the LPA.
“Fund Admin gets paid by the GP but works for the investors.”
Admin also coordinates with the GP to make sure that the fund is calling for enough capital, not only to fund their investment, but also for other expenses.
We have great software and effective ways to communicate with the GP and LPs.
Admin Importance Related to Growth
If you don’t have a 3rd party admin, small investors might work with you, but high net-worth individuals/companies never will.
Before Bernie Madoff’s ponzi scheme only 60% of hedge funds used a 3rd party fund administration, but after he was exposed, this number jumped to 90%!
Bridger: As a fund manager, at what point do I need to consider hiring fund admin?
Jerry: If you have a fund that’s worth a few million dollars and is comprised of your friends’ and family’s money, then you don’t need to hire fund admin.
I would recommend you have a PCAOB-certified firm audit your fund.
The Public Company Accounting Oversight Board is a non-profit that regulates auditors of public companies in order to minimize audit risk.
To be clear, if your fund is small enough and it doesn’t make sense to hire fund admin, then at least get a yearly audit.
I recommend that after surpassing $15M aum, you start looking for an accredited fund administrator.
Tiers
You’ll want to look at different admin options depending on how big your fund is.
For example, Jerry considers Strata to be a mid-tier fund admin. He classifies “mid-tier” as a fund that has anywhere from $20M to $1B aum.
Conclusion
We only covered about half of our interview on this blog, so check out my video to see the rest!
Hopefully, you learned as much as I did about fund administration with Jerry Wright!
If you’re still confused about fund admin, check out Fund Launch!
That’s it for today,
Thanks,
Want to get direct guidance for your fund? Schedule a time with my Fund Advisors!
DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the authors.
