Fund Administrator

A mid-sized Category III AIF runs on a small team — the workbook suggests 5 to 10 employees — focused on investing. Keeping the books, calculating NAV every valuation day and producing investor reports is a separate job. The Fund Administrator, also called a Fund Accountant, does it.

The workbook calls it a crucial support function to the manager. The manager or sponsor appoints the fund administrator for maintenance of accounts and investor reporting, alongside other service providers such as the custodian and the registrar and transfer agent.

One point stands out: fund accounting or fund administration is not a regulated function in India, unlike in other developed markets. There is no SEBI registration for it.

What a fund administrator does (4.2.4)

• Maintains the fund's books and records
• Accounts for and allocates income and expense accruals
• Provides global regulatory compliance reporting and tax reporting services
• Conducts NAV calculation, valuation services and risk reporting
• Gives access to database vendors and handles dealing-related enquiries
• Prepares payment instructions to settle fund expenses and keeps an electronic payments library for daily reconciliation of cash and security balances
• Co-ordinates company secretarial matters, including board and shareholder meeting documentation
• Prepares investment manager statements, interim financial reports and annual reports
• Supports the fund's auditors

Who can do it. Many foreign funds use fund administrators established in India. A custodian typically offers these services alongside custody. Other vendors can be used, or the work done in-house if the fund has few investors or computes NAV infrequently.

Why independence matters. The SEBI (AIF) Regulations require NAV calculation to be independent from the fund management function — a reason to place it with an administrator rather than the investment team.

Cost. Fund administrator fees are a fund expense investors may negotiate a cap on. GST applies to them, and because a Category III AIF has no output GST liability it cannot use the input credit — so the GST is a real cost indirectly borne by investors.

Workbook Example 6 (Chapter 6) — Fund N, Mumbai, corpus Rs 98 crore, 9,80,000 units. Its fund administrator fees for FY 2022-23:

Fund Administrator fees          = Rs 42,70,000
Add GST @ 18%                    = Rs  7,68,600
Total fund administrator cost    = Rs 50,38,600

Because Fund N has no output GST liability, the Rs 7,68,600 cannot be set off. Per unit:

Rs 50,38,600 ÷ 9,80,000 units = Rs 5.1414 per unit

Illustrative extension. The investment committee of Sahyadri Arbitrage Fund compares options:

Sahyadri is open-ended with 400 investors and monthly NAV disclosure. In-house is a poor fit; it appoints a third party and negotiates a fee cap — something the workbook says investors should push for on avoidable expenses such as fees to fund administrators.

Chapter 4 (Category III AIF: Fund Structures and Service Providers) lists fund administrators among service providers and details their role at 4.2.4; its sample question asks which entity is least likely to be a service provider (the sponsor). Chapter 5 places the fund accountant in Step 1 of fund formation. Chapter 6 treats their fees as fund expenses and computes GST on them, and Chapter 7 asks investors to check service-provider conflicts during due diligence.

• Fund administration is not a regulated function in India, unlike in other developed markets.
• Fund Administrator and Fund Accountant are the same role in the workbook.
• The custodian often offers these services, but custody (safekeeping and settlement) and administration (books, NAV, reporting) are different jobs.
• The sponsor is not a service provider; the fund administrator is.
• GST on administrator fees is a cost, not a credit, for a Category III AIF — except one operating from an IFSC, which is exempt from GST.
• NAV must be independent of fund management — calculation sits away from the investment team.