Hedge Fund Administration

A hedge fund is a flexible investment company for a small number of large investors. Hedge funds are collective investment schemes akin to pension funds, mutual funds, and unit trusts. But they differ in the fact that they can be unregistered and have more freedom in choosing risky or speculative methods of investing. With the growth of hedge funds also came variations in the basic theme. Some hedge funds are now open to the small or retail investor as well.

Apart from the basic tasks of acquiring customers for the fund (the assets) and managing the assets of the hedge fund (i.e. deciding when, where and how much to invest), everything else falls under the umbrella of hedge fund administration. These administrative duties include:

Calculation of Net Asset Value (NAV) including the calculation of the funds income and expense accruals – this value is similar to the price of a share in the stock exchange. It varies every moment based on the current investments of the fund and their valuations.
Preparation of semi-annual and annual accounts – for reporting purposes.
Maintenance of the fund’s financial books and records – primarily for the benefit of the regulatory bodies and their customers and stakeholders.
Payment of the funds expenses
To reconcile Daily and Monthly Broker Statement – all funds invest in financial securities through brokers and dealers who specialize in particular instruments. To get better pricing multiple brokers are used for the same investment. The reconciliation is to ensure all the numbers add up for a particular financial security.
Settlement of daily Trades, assuring that the proper dividend and interest are received, updating price of securities of client – trade settlement is a technical term relating to the process of matching the trading books of the counterparties of a particular trade.
Pricing of Security
Calculation and payment of dividends and distributions (if required) – not all hedge funds pay out interim dividends; it depends on the investment strategy and the needs of the investors.
Supervision of the orderly liquidation and dissolution of the fund (if required) – undertaken at the close of the hedge fund. Apart from bankruptcy a fund might close simply when it comes to end of its intended life, which is again something that is decided by the investor’s needs at the onset.

Hedge fund administration jobs include Fund Administration Associate, Hedge Fund Accountant / Fund Controller, Fund Administrator, Senior Associate Accountant, Portfolio Accountant, Hedge Fund Administration Executive, and Senior Accountant.

Training in hedge fund administration is provided by many financial education institutes. One of the reputed online certifications for hedge funds professionals is the CHP (Certified Hedge Fund Professional) designation. If you are mathematically and financially inclined and would like to pursue an exciting financial career, consider a course in hedge fund administration.