Shadow Fund Accounting And Shadow Investor Services Provider In Cayman Islands

Shadow Fund Accounting and Shadow Investor Services Provider in Cayman Islands

Following the 2008 financial crisis, coupled with the Madoff scandal as well as the failure/insolvency of several financial service firms, and with increasing regulations and investor demands for transparency, engaging a third party to “shadow” your fund’s administrator has become an industry norm.

As investment managers look to strengthen their middle and back office operations, they realize the benefits of partnering with administrators like AFA who are SOC I compliant and have the expertise in trade capture, reconciliation, and price verification to ensure fund data is complete and accurate. As a result, shadow accounting is growing in popularity as investment managers offer their clients the additional level of comfort that an outside firm is verifying their portfolio reporting.

AFA has implemented a solution to capture, reconcile and verify the pricing of portfolios so as to “shadow” the investment manager’s own back office reporting, while offering an important independent check for investors. Responsibility for accurate valuation reporting remains with the investment manager, but the addition of this “shadow” role when performed by AFA provides a greater level of comfort for investors.

AFA will work with fund clients, as well as investment managers or directors who are performing certain fund accounting functions “in-house” or who have contracted with a third party fund administrator, to customize a client’s shadow administration program that is tailored to meet specific needs.

AFA’s shadow accounting services focus on the areas of fund accounting and investor services.

Fund Accounting

AFA’s Shadow Fund Accounting Services are performed by experienced AFA accountants and encompass verification of the following:

  • Portfolio reconciliation for variety of fund structures to include standalone, master feeder, side by side, fund of funds, etc.
  • Calculation of management fees and performance/incentive fees
  • Fund Net Asset Value (“NAV”), whether daily, monthly, quarterly or annually
  • Periodic financial reports and statements to include balance sheet, income statement, general ledger, statement of changes in partners’ capital, statement of changes in financial condition, investor statements, and performance tables.
  • Year-end review of annual audited financial statements, once drafted by the fund or current administrator, before submitting to the fund’s board for review and/or the fund’s auditor for review and attestation
  • Capital accounts or unitized values
  • Review of Quarterly or Annual Board presentations

Investor Services

Shadow Investor Services provides fund managers with accurate and up-to-date data maintained by AFA in the event of unforeseen technical difficulties or inadequate disaster recovery procedures. AFA’s services include:

  • Review of subscription documents, confirmation notes, share/unit transfer requests, capital call requests, and redemption requests
  • Verification of calculations for fund balances and distributions
  • Review of AML documentation