Fund Operation

Fund Manager

The fund manager manages the funds in accordance with the relevant provisions incorporated in the memorandum and articles of association, trust deed or other constitutional document.  It is responsible for the funds’ operation. It has quasi fiduciary obligations.

The fund manager makes the requisite investment decisions advised by the investment manager or advisor.  It undertakes purchases and sales of units in the fund and informs investors.  It maintains the funds accounts, records and documents. It prepares annual accounts and reports.

The manager or its delegated administrator handles administrative matters, dividends, and distribution.  It markets the fund to the public. It liaises with the relevant advisors and service providers.

The fund manager liaises with trustees and custodians in relation to portfolio transactions and the redemption of shares. The fund manager arranges annual and other meetings when required.

It maintains share registers and issues share certificate or their dematerialised equivalence.  It ensures the fund is operated in accordance with the trust deed and with applicable legislation and is the principal point of contact for investors.

Generally, the fund will subcontract many of its activities while remaining responsible for them.

Manager Charges

The fund manager earns fees through a variety of means.  It charges fees for subscriptions.  This is generally a percentage commonly up to five per cent of the value of the shares/units issued.

It may charge an annual administration amount/charge, which may be a percentage of net assets.  The charge accrues daily or monthly.  It may charge for other functions either undertaken itself or delegated to a service provider.

Fund managers may earn performance-related fees in certain industries, in particular hedge fund industries, where performance may be based on special skills.

Where there are exit fees charged on the value of redeemed shares, they may be on a stepped basis or a proportion payable for earlier redemptions.

Advisory Services

Unless the fund is itself an investment house or service provider likely to appoint an external investment advisor to advise on investment strategy.  The advisor may advise only the decision to invest that of the fund manager execution of the decisions it would be trustee or custodian. The fund manager may appoint an external investment manager.

The advisory services are provided under a service contract.  The advisors usually paid a percentage of the net asset value of the fund subject to some cases to a minimum per annum.

In hedge funds, the performance basis for the investment managers may be heavily weighted and incentivised.

Fund Administrators

Some fund managers may outsource fund administrations to a third-party fund administrator.  The manager may retain overall responsibility.

Certain activities may only be outsourced depending on circumstances, including, for example, maintenance books and records, invested liaison, queries and complaints liaison with trustee and custodian.

Fund valuation, support services, cash management, financial management, reconciliation of books as funds with the trustee, and consolidated records.. administrators may provide secretarial services, valuation and accounting services.

Where the fund is established as a unit trust, the primary responsibility for the registrar rests with the trustee.  The registrar maintains shareholder and unit holder records.  The books are the primary evidence of ownership of shares and establish entitlement to distributions, et cetera.

Trustees

A trustee owes fiduciary duties.  In addition, its functions are supplemented by legislation and regulatory obligations.  It may be required to be a bank under some regimes.  In any event, it will require substantial capitalisation and tested and established systems.

The trustee or custodian must hold the assets, segregate and account for them. The trustee must provide independent oversight of the fares of the fund and protect the interest of the investors.

It must state card and say to keep the assets of the fund.  It must maintain accounts.  It must settle investment frames by delivering assets in cash and ensuring.

Trustee fees are usually paid from the assets of the fund.  They will be a percentage of the net assets’ value to carry on fees per transaction.  There may be a minimum fund fee provided.

Trustees/custodians may be part of international groups with the capacity to hold assets in the relevant jurisdiction from which they are placed.

Trustee Duties

The trustee/custodian must ensure the fund does not breach its own constitutional rules or limits.  It must ensure that the assets of the fund are properly held and registered.  It may be held by the trustee itself or by a nominee.

It must ensure the fund is managed in accordance with the terms of the trust deed or equivalent.  It must ensure the fund complies with relevant legislation and regulations.

The custodian/trustee must maintain a register of unit-holders and approve the promotion of the share in advertising to ensure compliance with regulatory requirements.  It must review the operational procedures of the fund manager.This latter obligation may require quasi-auditory review.

The trustee will report on assets on an ongoing basis.  This will include reporting on deviations from the requisite asset allocation limits and other guidelines.  A standard report will include multi-currency portfolio valuations, transaction statements, statistical analysis, and income statements.

A custodian of a fund has obligations broadly similar to the trustee as set out above. The applicable regulations will give a quasi-fiduciary obligation, notwithstanding that it is not strictly in trust.

Audit

It is generally a statutory or regulatory requirement that a fund be audited.  Even where jurisdictions do not so require, an order is likely to be undertaken in terms of investor confidence.

The audited accounts must be returned to the regulator.  The auditor may be obliged to disclose matters of concern to the regulator when prompted. Regulators are likely to require an auditor with a sufficient track record and expertise in fund audits.

Legal Advisors

The legal advisors to the fund would advise on the structuring of the fund.  They will assist in making applications for regulatory approval and drafting and reviewing the service contracts with the key fund provider.  They advise on applicable regulatory regimes in the jurisdiction.