Fiduciary Duties of a Private Capital Fund Administrator
Private capital fund administrators are tremendous partners for growing private capital funds, fund management, and their investors. While hired by the fund, the primary fiduciary responsibility is to protect and provide oversight on behalf of the investors; to protect the investors. Good fund administrators offer valuable checks and balances for the fund's investors. The seven overarching duties of fund oversight for investors are written here.
Duty of Care:
Exercise reasonable care, skill, and diligence in carrying out administrative functions.
Maintain accurate and complete books, records, and financial statements.
Implement robust internal controls and compliance processes.
Conduct proper due diligence and ongoing monitoring of fund operations and fund manager activity.
Duty of Loyalty:
Refrain from self-dealing or engaging in activities that compete with the fund's interests. •
Maintain confidentiality of investor and fund information.
Avoid conflicts of interest and disclose any potential conflicts promptly that could negatively affect the investors.
Act in the best interests of the fund and its investors, placing their interests above personal or third-party interests. The first duty is to the investors.
Duty of Obedience:
Adhere to the fund's governing documents (e.g., limited partnership agreement, private placement memorandum, etc.).
Comply with all applicable laws, regulations, and industry best practices.
Ensure that the fund operates within the stated investment objectives and strategies.
Escalate and report any violations or breaches of the governing documents or regulations.
Duty of Prudence:
Exercise sound judgment and prudence in all administrative and operational decisions.
Implement appropriate risk management practices and controls.
Safeguard and properly custody the fund's assets and investor capital.
Maintain adequate contingency plans.
Duty of Good Faith:
Act with honesty, integrity, and transparency in all dealings related to the fund.
Provide accurate and timely reporting to investors and regulatory authorities.
Disclose material information and potential conflicts of interest promptly.
Treat all investors fairly and equitably, without favoritism or discrimination.
Duty of Oversight:
Actively monitor and oversee the fund manager's activities and performance.
Ensure that the fund manager adheres to the governing documents and regulatory requirements.
Identify and address any potential breaches, misconduct, or mismanagement by the fund manager.
Escalate concerns and take appropriate action to protect the interests of investors.
Duty of Competence:
Maintain the necessary knowledge, skills, and expertise to effectively administer the fund.
Continuously educate and update knowledge on relevant laws, regulations, and industry developments.
Seek professional advice and guidance when necessary to ensure compliance and best practices.
By upholding these fiduciary duties, fund administrators can fulfill their crucial role in maintaining the integrity, transparency, and compliance of private capital funds. It is essential to prioritize the best interests of investors while adhering to ethical standards and regulatory requirements
