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Hedge Fund Administrators

History

In the past, a majority of hedge funds performed some or all administrative functions in-house. That changed as a result of investment scandals that played a key role in the Great Recession in the late 2000s. Investor demands for financial transparency and third-party management of back- and middle-office functions prompted many hedge funds to outsource some or all of these functions to hedge fund administrators (HFAs). From 2006 to 2013, the percentage of hedge fund AUM administered by HFAs increased from 50 percent to 81 percent, according to PricewaterhouseCoopers. Using third-party administrators also looks good to government regulators, who strongly encourage independent oversight of hedge fund back- and middle-office operations.