The primary task of a fund administrator is to independently calculate the net asset value of a fund on a monthly basis. In order to do so confidently the Fund Administrator needs to be able to:
- Verify that trades/subscriptions/redemptions took place in reality and were settled correctly
- Verify that the investment manager used fair pricing while purchasing or selling the assets
Verifying the trades is usually accomplished by comparing the books stored by the investment manager with that of a broker used by the investment manager. Subscriptions and redemptions are verified much the same but instead of broker books agent books are used. Among commonly used verifiers are CUSIP, ISIN, SEDOL and SYMBOL. One of the bigger challenges during this stage is to cross-reference securities reported by the investment manager against those reported by the broker. The financial industry still doesn’t have a common security identification code and investment managers trading through multiple brokers are likely to have a slightly different internal set of identifiers than the one in use by brokers. So in order to do reconciliation correctly, a fund administrator needs to be able to freely switch between CUSIP/ISIN/SEDOL or any other identifier and fill in the blank ones if needed.