How to switch fund administrators without missing a quarter

Before you start

Read the exit clause in your current administration agreement. It tells you the notice period, whether there is a termination fee, whether you pay through the notice period, and, if the agreement is well drafted, what the outgoing administrator must hand over and in what format. If it says nothing about handover, assume you will have to ask for everything by name.

Then call the auditor. Not after you have signed with the new provider; before. The transition year is the one where audits go long, and the auditor will tell you which timing they can live with.

Every guide we found on this subject is written by an administrator with a commercial interest in your moving, so the timelines below are their claims. They are consistent enough to plan around.

Step 1. Pick the cutover date

Choose a quarter end, and preferably the one that gives the new administrator a clean start. For a calendar-year fund that means a September 30 cutover so they open the books on October 1 and carry the fund into year end, or a December 31 cutover so the audit works from one set of records. Trident Trust argues for year end. Ocorian argues against, because year end is audit season for everyone. Pick the one your auditor prefers.

Never cut over mid-quarter. The capital accounts have to close on one system and open on the next.

Step 2. Give notice

Written notice, dated, to the contact named in the agreement, with the cutover date and a request for the handover package. Sixty to ninety days is the common requirement. Give it the same day you sign the new engagement so the clocks run together.

Step 3. Define the handover package

Ask for all of it, by name, in machine-readable form:

• General ledger and trial balance at cutover, and the full transaction history since inception.
• Capital account statements per LP, every quarter since inception, and the closing balances at cutover.
• Investment cost basis, valuations and the valuation support.
• Fee calculations, management fee and carry, with the waterfall logic as applied.
• Investor records: contacts, commitments, subscription agreements, side letters, tax forms, and the KYC and AML files, which transfer only if your agreement allows it.
• The document archive: every capital call and distribution notice, quarterly report, K-1 and audit report.
• Bank statements and reconciliations.

Ocorian's warning is the one to remember: a new provider may want to "draw a line in the sand" and start from the cutover balances without the history. Insist on the history. The auditor and your LPs will.

Step 4. Rebuild and reconcile

The new administrator loads the history and rebuilds the books to cutover. Then three reconciliations: closing capital accounts at the old provider equal opening capital accounts at the new one, per LP, to the cent; the bank balance agrees to the ledger; and the investment schedule agrees to the last quarterly report. FundCore's point is practical: most auditors are not materially affected if the incoming administrator has 60 days to rebuild.

Run one quarter in parallel if you can afford it. Formidium's warning that traditional parallel runs can last six months is a reason to scope the parallel run tightly, not to skip it.

Step 5. Cut over

Transfer capital call authority, portal access and LP communications on the agreed date. Send LPs one note a week before: the date, the new portal, the new contact, what changes for them. Issue nothing from the old provider after cutover. Keep read access to the old portal through the next audit.

Step 6. The transition-year audit

Agree in writing which administrator supports the audit and for which periods. The custody rule still requires audited financials to LPs within 120 days of fiscal year end, or 180 days for a fund of funds under SEC staff relief, and the auditor will not accept "the old administrator has the records" as an answer. NAV states it replicates year-to-date data to support a mid-year audit; ask your new provider for the same commitment in the engagement letter.

The two mistakes that cost a quarter

• Signing the new provider before reading the old exit clause. The notice period and any termination fee then set your timeline, not you.
• Accepting cutover balances without history. Every later question from an LP or an auditor about a pre-cutover figure becomes a request to a firm you no longer pay.