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Solutions - Fund Accounting

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Fund Accounting

Fund Accounting: An Overview

The investment industry involves the management of financial assets on behalf of investors, with the goal of generating returns and managing risk. Within this industry, fund accounting is a crucial function that plays a vital role in the success and sustainability of various types of investment funds, including mutual funds, hedge funds, private equity funds, and other alternative investment vehicles.


Fund accounting involves the recording, reporting, and analysis of financial transactions and positions of the funds. The primary objective of fund accounting is to provide accurate and timely information to investors and regulatory bodies. This information is used to evaluate the performance of the fund, monitor risks, and make investment decisions.


In this article, we'll explore the key concepts, principles, and practices of fund accounting in the investment industry.

Types of Investment Funds

Investment funds can be broadly categorized into three types: mutual funds, hedge funds, and private equity funds.


Mutual funds are open-ended investment companies that pool money from investors to purchase securities. Mutual funds are regulated by the Securities and Exchange Commission (SEC) and are required to disclose their financial statements to the public.


Hedge funds are private investment funds that are only available to accredited investors. Hedge funds are characterized by their use of alternative investment strategies, such as short-selling, leverage, and derivatives, to generate high returns. Hedge funds are not required to disclose their financial statements to the public and are subject to fewer regulatory restrictions than mutual funds.


Private equity funds are investment funds that invest in private companies or public companies with the goal of taking them private. Private equity funds are typically structured as limited partnerships and are only available to accredited investors. Private equity funds are subject to fewer regulatory requirements than mutual funds but are subject to more stringent reporting requirements than hedge funds.

Fund Accounting Principles

Fund accounting is guided by several principles that are designed to ensure accurate and transparent financial reporting.


Accrual Accounting: Accrual accounting is used to record financial transactions when they occur, regardless of when the funds are received or paid. This method provides a more accurate picture of the fund's financial position than cash accounting.


Fair Value Accounting: Fair value accounting is used to value the fund's investments, which can include stocks, bonds, and other financial instruments. Fair value accounting requires the use of market-based prices to determine the value of the fund's investments.


Separation of Fund and Management Company: Fund accounting requires the separation of the fund's financial activities from the financial activities of the management company that oversees the fund. This separation is necessary to ensure that the fund's financial information is accurate and unbiased.


Regulatory Compliance: Fund accounting requires compliance with various regulatory requirements, such as those set forth by the SEC and other regulatory bodies. Compliance with these requirements ensures that the fund's financial information is accurate and transparent.

Fund Accounting Practices

Fund accounting involves a range of practices that are designed to manage the financial operations of the funds.


Portfolio Valuation: Portfolio valuation involves the regular valuation of the fund's investments to determine their fair value. This information is used to calculate the net asset value (NAV) of the fund.


Fee Calculation: Fee calculation involves the calculation of the fees charged to investors, including management fees, performance fees, and other expenses.


Investor Reporting: Investor reporting involves the preparation of financial statements and other reports for investors. These reports provide investors with an accurate picture of the fund's financial position and performance.


Regulatory Reporting: Regulatory reporting involves the preparation of reports for regulatory bodies, such as the SEC. These reports provide regulators with an accurate picture of the fund's financial activities.


Fund accounting is a critical function within the investment industry that is designed to manage the financial operations of various types of investment funds.

Why Fundtec for Fund Accounting:


The following are some factors that should be considered for outsourcing Fund accounting Services to Fundtec:


  • 24/5 Availability- Our "follow the sun" model ensures that Asset Managers, irrespective of time zone, will get fund accounting services when they need them.

  • Solid Documentation- When someone is expected to perform a task, the most beneficial thing to do is create process documentation. That is what we do in our Fund Accounting services. Our SOPs are updated regularly, and our team delivers reconciliation with certainty and confidence. Resources may come and go, they get migrated to different roles within the organization, or they're out sick or on vacation, whatever the case may be, when another team member steps in, you need good documentation with training in place to ensure continuity. 

  • Customized Offerings- One shoe size doesn't fit all, so Fundtec customizes and tailors its Fund Accounting solutions to fit the unique needs of every client.

  • Industry Expertise- Fundtec's team comprises professionals coming with a wealth of experience from investment banks, fund admin firms, and technology giants. For Fund Accounting Services, we have expertise in handling all types of asset classes (from listed securities to OTC products), and reports from different fund admins, brokers, and custodians.

  • Scalability- Fundtec empowers clients with better scalability via plug and play model which is always customized to the client's needs.

  • Cost-Effective- Fundtec's expertise, innovation, experience, and result-oriented approach to operational aspects enable us to drive greater process efficiency, and we pass the benefits and savings to our clients.

  • Transition and Change Management experts: With years of experience in handling transitions, we always consider all stakeholders for changes and transitions. Our client-centric approach enables a smoother fund accounting service for all types of clients. 

  • ISO Certified: We at Fundtec understand that every piece of information is crucial for our clients, so we follow the highest standards for maintaining quality and data security. Fundtec is ISO:27001 and ISO:9001 certified for providing Fund Accounting service.

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