An EY survey found that only one in five asset managers would recommend their fund administrator. Here is what goes wrong, what the red flags look like, and how to avoid the same mistakes.
An EY Luxembourg study [1] on customer experience in the asset servicing industry, authored by Brice Lecoustey, Nicolas Bannier, Laurent Moscetti and Norman Finster, found that only about one in five pure-play asset managers (20%) would recommend their current asset servicer. The same study identifies the recurring impediments to loyalty as low quality of customer service, poor customer experience and inadequate digital capabilities, with complaints concentrated around lack of follow-up, slow responsiveness and fragmented systems. Your administrator handles investor onboarding, capital calls, regulatory filings, and the technology your LPs log into every quarter. An 80% dissatisfaction rate at that layer of the stack is a market problem, not a vendor problem.
The market is large. Growth Market Reports [2] puts global fund administration outsourcing at $13.6 billion in 2024, headed past $20 billion by the early 2030s. At least 70% of US fund managers already outsource some part of their back office, according to Aztec Group [3], and Ocorian [4] expects that to climb to 96% within three years. Outsourcing is the default. Satisfaction is the problem.
What goes wrong
Over 13% of fund managers plan to switch their administrator within the next 18 months, according to Ocorian [4], and switching activity is concentrated at the smaller end of the market where service quality issues bite hardest. The four drivers Ocorian flags are consistent: service levels and SLA breakdowns, poor data and reporting quality, technology gaps, and cost increases that don't track service improvements. The same research puts cost at 25% of switching reasons and multi-jurisdiction coverage gaps at 19%, with technology and service quality making up most of the balance.
The pattern behind these numbers matters more than the numbers themselves. Fund administration is a relationship business that has been consolidating rapidly. Fund Recs has been logging administrator M&A deals for more than a decade [5] and they keep coming. When administrators merge, client service often gets worse. Your dedicated accountant gets absorbed into a larger team. Your point of contact changes. The knowledge of your fund structure (the side letter terms, the waterfall quirks, the LP preferences) disappears. CFO tenure across major US-listed companies is now around 3.5 years on average [6], and there's no reason fund administration firms are immune to the same dynamic. Each senior departure resets your institutional memory and the cycle repeats.
The bait-and-switch problem is common. A polished pitch team wins your mandate, then hands your fund to a junior operational team in a shared service centre. The people who understood your strategy during sales aren't the people processing your capital calls six months later. Ocorian's diagnosis of why managers switch reads like a list of these handoff failures: offshored teams that don't specialise in fund accounting, reliance on Excel where the sales deck promised proprietary software, disparate systems across jurisdictions that turn a basic consolidation question into a multi-week reconciliation project.
When it goes seriously wrong
Most administrator failures are slow-burning service issues. But the catastrophic cases show why independent administration matters. Abraaj Group [7] managed roughly $14 billion before collapsing in 2018; founder Arif Naqvi was later found to have orchestrated a cover-up of a $400 million shortfall across two of Abraaj's funds, with the Dubai Financial Services Authority fining Abraaj entities almost $315 million and Naqvi personally $135.6 million. There was no independent administrator in place to catch it, and the misreporting went undetected for years. CI Investments returned $156.1 million to investors [8] in an Ontario Securities Commission no-contest settlement after inadequate oversight of an outsourced provider led to interest income being omitted from NAV calculations. Calvert Investment Management paid a $3.9 million SEC penalty [9] in 2016 and roughly $27 million to mutual funds and their shareholders after improperly valuing securities between 2008 and 2011, leading to incorrect NAVs, mispriced shareholder transactions, and inflated asset-based fees. Infinity Q Capital Management [10], whose flagship Diversified Alpha mutual fund grew past $1.7 billion in AUM, was shut down after the SEC charged its founder with overvaluing fund assets by more than $1 billion by manipulating the inputs to a third-party pricing service; he was sentenced to 15 years in prison [11].
These aren't edge cases from another era. They're recent failures that explain why 92% of LPs prefer managers who use independent third-party administration [12], and why 85% of LPs have rejected a manager over operational concerns alone [13]. After Madoff, after Abraaj, after FTX, LPs won't accept self-reported numbers without independent oversight. And they won't accept a polished investor portal if the underlying records don't reconcile. At most institutional LPs, operational due diligence now sits with the partner signing the check, not the back office.
Red flags to watch for
Operational red flags often appear during the sales process if you know what to look for. Reluctance to do a live demo of the technology platform (not a canned presentation, an actual walkthrough of the system) means the technology probably doesn't work as advertised. High client exit rates (ask for references and check how long they've been clients) point to deeper satisfaction issues. Vague answers about team assignment ("we'll allocate the right resources") usually mean you'll be sharing an accountant with twenty other funds.
Data and reporting red flags emerge quickly after onboarding. Financial statements that don't reconcile with investor records. Timing discrepancies in corporate action processing. Incorrect FATCA or CRS filings. Heavy reliance on spreadsheets despite claiming proprietary technology. An administrator that can't produce ILPA-compliant quarterly reporting hasn't invested in staying current with industry standards: the ILPA released version 2.0 of its Reporting Template in January 2025 [14], expanding mandatory expense categories from 9 to 22 and adding line items for subscription facility fees and interest, placement fees, partner transfer costs, and internal chargebacks. Funds in their investment period in Q1 2026 or starting after January 1, 2026 are expected to use the new template, and LPs have already started asking GPs about ILPA 2.0 compliance during ODD.
Financial red flags are subtler. Fund administration pricing is opaque. A low headline rate of 2-4 basis points that generates a stream of add-on invoices for "non-standard" services (ad hoc reporting, extra investor communications, regulatory filing fees, technology access) can end up costing more than a transparent all-inclusive model. Ocorian's research [4] reports that 65% of alternative fund managers have been hit with governance-related fines or sanctions in the last two years. Most of those trace back to administrative failures, not investment ones. The cheapest administrator is rarely the cheapest total cost of ownership.
What sophisticated managers ask
The due diligence questions that separate experienced managers from first-timers go well beyond "what's your technology?" Here are the ones that reveal the most.
On continuity: What's your staff turnover rate in fund accounting over the last three years? What's the average tenure? If my primary contact leaves, what's the handover protocol and how long does it take? How many funds does each accountant handle at once?
On error handling: Walk me through the last significant error you made for a client. What happened, how was it caught, and what changed? What's your NAV error rate and what do you consider material? Do you carry errors and omissions insurance, and what are the limits?
On technology depth: Show me a live demo of your investor portal and reporting dashboard. Is your system a single integrated platform or stitched-together acquisitions? What does your API documentation look like? Can my internal systems pull data programmatically? How do you handle data migration during onboarding, and what's the typical timeline?
On business viability: What percentage of your revenue comes from your top five clients? Are you in M&A discussions or have you been acquired recently? What's your client retention rate over the last three years?
An administrator that answers these questions openly and with specifics has nothing to hide. An administrator that deflects to marketing materials or promises to "follow up later" is telling you how they'll handle your fund.
It also helps to invert the exercise. Ask the administrator for the names of two LPs who have called them directly during a capital call or distribution and have them describe how that interaction went. Ask which of their clients have moved upmarket (Fund I to Fund III) without changing administrator, and which have left. Ask to see a redacted sample of the last fund accounting close package they produced for a fund your size. How they answer matters more than what they actually say. You're looking for whether the discipline is there in the way they describe their own work.
The scale mismatch problem
The fund administration market is splitting. Large administrators are moving upmarket toward bigger funds, where the economics are better. This creates a service gap for emerging managers running $10M-$100M funds. Your $30M Fund I generates the same fixed administrative overhead as a $300M fund (same monthly minimums, same regulatory filings, same investor communications) but produces a fraction of the fee revenue.
The result: emerging managers at large administrators often get deprioritized. Reports arrive late because your fund is lower in the queue than a $500M client. Support requests take days instead of hours. Your administrator is technically competent but functionally unresponsive because you're not economically significant to them.
A new category of administrator has emerged: technology-native platforms built for the emerging manager segment. These platforms use automation to deliver institutional-grade services at a cost structure that works for smaller funds. The economics only work because the technology removes the manual overhead that makes small clients unprofitable for legacy administrators. The trade-off: these platforms are newer, with shorter track records. The upside: they're building for you, not retrofitting a large-fund service model downward.
I talk to managers every week who are unhappy with their administrator but cannot face the cost of switching. They have stale data in five different systems and a quarterly close that takes six weeks. The reluctance is rational. Switching is hard. But every month you stay with a broken setup is a month your LPs are looking at imperfect numbers. Switch sooner than you think you should.
How we built Infra One for this
We started from the premise that emerging managers deserve the same operational quality as established funds, without the same cost structure. Our Backbone platform automates investor onboarding, capital calls, distributions, NAV calculations, and LP reporting. Our pricing is transparent and published on our website. Every client gets a dedicated team. We work across the US, UK, Germany, Austria, and Cayman with the same technology and service standards. We're built to scale with you. The same platform that runs your first SPV runs your Fund II.
