Why You Should Be Using a Third-Party Fund Administrator, According to ChatGPT

Authored by: Michael Hall, Principal
Updated on: October 5, 2023

We Asked

What are the benefits and drawbacks of using a third party for private equity fund administration?

Open AI ChatGPT

The use of third-party administrators for private equity (PE) fund administration offers both benefits and drawbacks. Here are some of the key points to consider...

Gen II Expert Response:

All the benefits ChatGPT mentioned are important, however, it fails to mention enhanced technology as a benefit of using a third-party fund administrator. While technology is an underlying contribution to cost savings, scalability, and efficiency gains afforded by partnering with a fund administrator, ChatGPT does not acknowledge purpose-built technology as a benefit in itself. Third-party fund administrators, such as Gen II, have unique insight into the needs of GPs across the industry and are therefore able to continually adapt their technology to meet those needs.

ChatGPT mentions drawbacks that are common concerns when GPs consider outsourcing their fund administration, such as the loss of control. Loss of control and dependency on a third-party fund administrator have been top of mind for many GPs in the context of the recent SEC proposal regarding service provider oversight. With the potential increase in requirements surrounding documentation on oversight, risk assessment, sustained delivery, and compliance coordination, it’s more important than ever that GPs partner with a fund administrator that acts as a true extension of their own back office. ChatGPT captures this well in the concerns about loss of control, dependence on third-party and communication challenges. Both GPs and fund administrators are increasingly focused on addressing these concerns through transparency, real-time accessibility of data, and efficient communication between parties.