Vega Asset Management

If you are considering creating a hedge fund, you have no doubt been overwhelmed by all of the paperwork and information that is required just to get the fund started. This is almost nothing compared to all of the paperwork and legal information that is required to keep the fund in operation. Whether you are operating a large hedge fund, or only looking at creating a small hedge fund there are several really good reasons why it is a good idea to look to outsourcing your hedge fund administrator.

First it is important to realize that a hedge fund administrator and manager are completely different jobs. The manager is responsible for picking the investments, while the administrator is responsible for ensuring that all funds comply with all applicable financial laws, tax laws and all other legal requirements. Your hedge fund administrator will also do nothing to help you research potential investments, nor will they handle any of the trades or help you raise capital.

Your hedge fund supervisor tends to be the person who is responsible for ensuring that your tax information is correct; your clients have all of the information pertaining to the finances of your hedge fund that they want, and that all paperwork is completed 100% accurately and on time without being late. This in the past was often a task that was handled in-house and as such resulted in expensive costs being added to the fund.

If the hedge fund administrator is an in-house position you must cover the salary, the office space, and any and all office supplies that they need to do their job including a computer, telephone, furniture and so forth. If you are using an outsourced hedge fund administrator you are able to save a bundle because you would share an administrator with numerous other hedge funds. This works best because most hedge funds do not require a full-time hedge fund administrator in order to be able to function properly, and sharing an administrator can cut the costs by as much as 75%.

This savings represents a huge difference when you are trying to reduce costs, while still have all of the information and paperwork that you need. While it may seem frivolous to simply be concerned with cutting costs you should also consider that outsourcing your hedge fund administrator means your fund can afford to hire experience rather than looking for someone who merely fits into your fund's budget. This could mean the difference between hiring a recent college graduate who is still learning the ropes, or hiring someone who has many years of experience and has a long track record of customer satisfaction.

You can imagine that these reasons give many hedge fund managers ample reason to outsource the hedge fund administrator with wonderful results every year. While it is possible to combine the hedge fund administrator and manager into one position, it is very difficult and can result in small and potentially costly mistakes that make the risk too great for the savings.

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