Launching a new fund is no easy task; from developing, defining and evidencing the investment strategy to documenting track records, filing the necessary paperwork all the way to securing capital commitments. With so many hurdles to jump, the last thing any manager needs during this process is additional work or complexity when onboarding with a fund administrator.
Point of contact
Having structured and launched 20 funds as an investment manager, plus a three year stint at the Jersey regulator, Aidan O’Flanagan, director and head of funds at Highvern knows the importance of the initial bedding in period with one’s administrator. “I am typically the first point of contact prior to a client being onboarded,” he says. “I love this part of the job; getting my hands dirty and being involved with the pre-launch phase.”
During this initial phase, O’Flanagan introduces the client to the Highvern experts, the lead director and the lead client managers, who will then manage the fund from start to finish.
One team to rule them all
It is common, especially for larger fund admins, to have separate onboarding teams, some of which are split up further with one group focused on KYC and AML management and another for onboarding. And there’s good reason for this; onboarding is an arduous task, having one team focused on just this allows for time and cost efficiencies.
Highvern, however, sees things differently. “First impressions last. The onboarding process is the most important time for getting to know the client and how the fund will operate,” says O’Flanagan. “There’s plenty of dialogue and lots of knowledge to be gained that will be vital to the ongoing relationship; we don’t want to lose any of that by having a separate team handling the onboarding.”
Furthermore, it is during this phase that lawyers and tax advisors are highly focused on the fund launch. “It’s a great opportunity to get close to these groups as well and impress
them,” adds O’Flanagan.
Beyond establishing a strong relationship with the client, ensuring the whole team understands the regulations, particularly KYC and AML, is an important risk management tool at onboarding and throughout a client relationship. “These are such important regulations and each jurisdiction has their own set of rules. There’s no simple answer to streamlining this process cross jurisdictionally,” explains O’Flanagan. “Given our strong compliance background we’re able to work with clients and investors to make a clunky process as smooth as possible.”
Another advantage of having one team working with the fund for its entire lifespan is setting it up in such a way that subsequent work is as smooth as possible. Highvern does this by creating a client matrix. “It’s a big job,” admits O’Flanagan. “We map out the relevant requirements of the LPA, laws and regulations and assign a process and control to each one and build these into our systems.”
The core reasoning behind this is ensuring that nothing is missed. “If a team member is on holiday for example, the key requirements have already been captured in our systems and anyone can step in and take over with minimal fuss ensuring everything is done in a timely and orderly manner. The matrix also works as an efficient centralised resource for new team members to get up to speed on a client.”
“It’s nice and clear to have it in the matrix form rather than reading through the LPA, legal and regulatory requirements constantly to make sure we’re on top of everything,” adds O’Flanagan.
Try on for size
Of course, every manager and fund is unique and requires differing levels of support. While Highvern has developed its own processes and ways of working, the team tailors its approach depending on the kind of client.
“For large managers, they typically have internal teams who are experienced, have good relationships with lawyers and are usually a long way down the process in terms of fundraising, structuring and drafting of documents when they approach us. When we’re working with these kinds of GPs it’s simply about being proactive and doing our job well.” However, that doesn’t mean the Highvern team’s background and experience doesn’t come into use. Thanks to his time at the JFSC, O’Flanagan has been able to give regulatory steers to large managers on numerous occasions. Most notably when a client director raised an issue with the waterfall language in an LPA. “The potential financial impact, and knock on effect on other funds to the GP could have been significant. One of the founding partners of the client called me to praise the individual and I remember him being so thankful that the client director was interested enough in their business to conduct such a thorough review, as from their experience the waterfall isn’t really looked at by the fund accountants until the carry starts to kick in.”
Highvern also works with spin-outs, which typically haven’t employed a CFO during the launch phase. “For these clients I guide them through the structuring, introductions to lawyers and umbrella providers. I act as quasi CFO at the beginning and this where we can add a lot of value,” says O’Flanagan.
Finally, Highvern is also experienced with brand new managers. “These are the most challenging as they don’t have a lot of fund management experience and so require more support from us but the strength of the relationship that is built can be very rewarding.”
Highvern’s focus, care and attention to the onboarding process reflects the team’s deep understanding of private capital fund administration. By spending the time and doing the work upfront, the team - and of course the client - can be confident everything is captured and accounted for, allowing for the smooth running of the fund throughout its lifespan, allowing managers to focus on their core work of investing and growing assets.
This article was sponsored by Highvern