Fund Oversight - What is Required?

Further to our recent articles covering fund oversight, we now examine in slightly more detail what is actually required of the oversight function.  In a largely outsourced and/or offshored fund administration environment, there are a number of parties to oversee, as well as a general requirement for governance to be exercised by the management company’s board.  Specifically, parties subject to oversight will include the Transfer Agent, Fund Accountant, and Custodian.  Fund documentation also falls under oversight requirements, ensuring that key investor information is maintained and accurate financial reports issued for example.

Key areas to be examined within Transfer Agency will be deal allocation, box management and Client Money, the latter being a highly sensitive area requiring detailed scrutiny.  Within Fund Accounting, oversight will tend to focus on pricing errors – have there been any incorrect NAVs or are there control weaknesses which could cause such a breach?  Part of regular oversight may involve test checking movements in daily NAVs and validating prices of individual investments within the fund value.

In an outsourced or in-house administration environment, a robust set of SLAs and KPIs will form part of proper governance.  Systems tools will provide exception reporting, flagging up areas of actual or potential breach as they arise.  Oversight specialists maintain daily checklists as well as detailed compliance monitoring plans, evidencing the work that they have done and flagging areas of concern to senior management.

Oversight has become an increasingly important function for the funds industry in recent years.  Oversight roles are increasingly sought after by fund administration specialists.