For asset managers, audit season is more than a routine compliance exercise—it is a critical period where operational precision, regulatory adherence, and investor transparency are all under the microscope. Even well-run funds can feel pressure during this time: schedules tighten, audit teams request detailed reconciliations, and reporting must be flawless across multiple fund structures and geographies.

For managers working with fund administrators who take a tech-first, low-touch approach, these challenges are magnified. While technology can streamline reporting and data aggregation, it cannot on its own replace proactive, hands-on guidance. Additionally, administrators with low or varying service quality may struggle to scale up or adapt to clients’ changing needs, further complicating the audit process.

The most common stress points exacerbated by a lack of high-touch support include:

• Delayed responses to audit inquiries: Solely tech-driven platforms often prioritize automated workflows over real-time human support. When auditors raise questions—whether about NAV adjustments, intercompany transactions, or fee calculations—delays in response can cascade into last-minute escalations.
• Limited visibility into complex structures: Private funds often have multi-class shares, co-invest vehicles, or feeder funds spanning multiple jurisdictions. Without a dedicated team that understands these nuances, managers risk receiving incomplete or confusing reports, increasing the potential for audit findings or rework.
• Incomplete reconciliations: Automated reporting can handle standard positions and cash flows, but unusual transactions—such as NAV loans, secondary trades, or FX adjustments—require expert judgment. Low-touch models can miss these, leaving managers responsible for manual corrections under tight deadlines.
• Reactive problem-solving: Tech-first providers often wait for issues to surface before addressing them. In contrast, high-touch administrators anticipate anomalies—spotting missing documents, reconciling prior period adjustments, and preparing schedules proactively to minimize disruption.
• Pressure on internal teams: When administrators are unavailable or lack deep operational knowledge, fund teams must shoulder the burden—preparing reconciliations, chasing auditors, and addressing exceptions—diverting time from strategy and investor engagement.

Managing risk

A high-touch fund administration model mitigates these risks. Dedicated teams with deep operational knowledge and experience across fund structures:

• Serve as a single point of contact for audit and regulatory queries, ensuring timely, accurate responses.
• Prepare detailed pre-audit schedules, including cash reconciliations, capital call and distribution statements, and third-party confirmations, as an integral part of our service delivery—without additional costs or requests. This high-touch service is embedded directly into our offering, ensuring that clients receive the support they need without added stress.
• Coordinate across custodians, prime brokers, and portfolio managers to reconcile positions and verify valuations.
• Anticipate unusual or complex items, such as subscription line loans, multi-jurisdictional tax considerations, or NAV adjustments for illiquid assets, reducing last-minute surprises.
• Provide transparent, customizable reporting tailored to the needs of auditors, investors, and internal management.

Ultimately, the difference between a stressful audit and a smoothly managed one comes down to the support model. Technology is essential, but human expertise, proactive guidance, and a relationship-driven approach ensure accuracy, efficiency, and peace of mind.

At Alter Domus, we combine leading-edge operational platforms with white-glove service. By integrating technology with hands-on support, we help asset managers navigate audit season confidently reducing risk, freeing internal resources, and delivering the reliability that investors and auditors demand.

The investment landscape has shifted dramatically, with fund administrators facing rising investor expectations, regulatory complexity, and market volatility. Traditional approaches no longer suffice.

Investors now demand greater transparency, faster reporting, stronger security, and lower fees—making technology the key differentiator between administrators that thrive and those that fall behind.

Most wealth managers already rely on digital platforms—94% of firms with $500M+ in assets and 61% of smaller firms use fintech to improve client engagement and efficiency.¹ The question is no longer whether to adopt new technology, but how quickly and effectively it can be deployed to transform operations.

How Technology Is Transforming Fund Administration

From spreadsheets to smart systems

The journey from manual processes to intelligent automation represents perhaps the most significant shift in fund administration technology. Historically, fund administrators relied heavily on spreadsheets and manual data entry—approaches that were not only time-consuming but prone to human error.

Modern fund administration technology has evolved to replace these outdated methods with integrated systems that automate routine tasks. Advanced platforms now handle everything from NAV calculations to investor communications with minimal human intervention. This transition eliminates the bottlenecks associated with manual processing while dramatically reducing error rates and improving overall efficiency.

Digitization of workflows and document handling

Document management has traditionally been one of the most labor-intensive aspects of fund administration. The digitization of workflows and document handling represents a quantum leap forward, enabling administrators to process, store, and retrieve critical information with unprecedented speed and accuracy.

The benefits extend beyond mere efficiency. Digital workflows create audit trails that enhance compliance and security while reducing the risk of document loss or unauthorized access. For fund managers and investors alike, this translates to greater confidence in the integrity of administrative processes.

Role of APIs in real-time data sharing

Application Programming Interfaces (APIs) have revolutionized how fund administration systems interact with each other and with external platforms. By enabling seamless data exchange between previously siloed systems, APIs create a connected ecosystem that supports real-time information sharing and processing.

This connectivity allows fund administrators to integrate with banking platforms, trading systems, and investor portals, creating a unified experience for all stakeholders. Rather than waiting for batch processing or manual reconciliations, information flows continuously between systems, enabling near-instantaneous updates and reporting.

Benefits for GPs and Operations Teams

The power of RNFs becomes clear when comparing SCR requirements. Consider two scenarios:

Faster, more accurate investor reporting

Perhaps the most tangible benefit of fund administration technology is the transformation of investor reporting. Traditional reporting cycles often stretched over weeks, with manual data collection and verification creating significant delays. Today’s technology-enabled administrators can compress these timelines dramatically, delivering accurate reports in days or even hours. 81% of clients using fintech platforms in 2025 report higher satisfaction from greater transparency and easier access to investment data.¹

This acceleration doesn’t come at the expense of quality. In fact, automated data processing and validation actually enhance accuracy by eliminating human errors and ensuring consistent application of accounting principles. Whether you’re a venture capital fund administration or managing traditional vehicles, digital tools compress reporting cycles from weeks to hours.

Improved scalability for fund growth

Traditional fund administration models faced inherent limitations when it came to scaling operations. Adding new funds or investors typically requires proportional increases in staffing and resources, creating operational challenges and cost pressures during periods of growth.

Modern fund administration technology breaks this linear relationship between growth and resource requirements. Cloud-based fund administration services can scale elastically as you grow—from managing a single fund in-house to migrating fund admin activities to a third-party platform. This enables administrators to support fund managers through growth phases without service disruptions or quality compromises.

Better risk management and compliance readiness

The regulatory landscape for investment funds continues to grow more complex, with new requirements emerging across jurisdictions. Fund administration technology has evolved to address this challenge through automated compliance monitoring and regulatory reporting capabilities.

Advanced systems now use regulatory rules engines to continuously monitor transactions and positions, flagging potential compliance issues early for proactive remediation. This reduces risk and workload for operations teams, replacing manual tracking and sampling with automated, comprehensive monitoring.

Comparing Traditional vs. Tech-Enabled Models

Manual bottlenecks vs. automated efficiency

The contrast between traditional and technology-enabled fund administration is clearest in operational bottlenecks. In conventional models, tasks like month-end reconciliations, NAV calculations, and investor distributions often create backlogs demanding all-hands-on-deck efforts.

Tech-enabled administrators remove these bottlenecks through automation. Reconciliations that once took days now finish in hours or minutes, with only exceptions flagged for review. NAV runs on set schedules with little manual input, and distributions flow through straight-through processes.

This shift goes beyond speed—it reshapes fund administration. Instead of routine data processing, teams now focus on exception handling, client relationships, and value-added analysis.

Fragmented systems vs. integrated platforms

Traditional fund administration relied on separate systems for accounting, investor services, compliance, and reporting, leading to integration issues, data inconsistencies, and poor user experiences.

Modern platforms take an integrated approach, spanning all functions to ensure data consistency, streamline workflows, and deliver a cohesive experience. With all data stored in a single ecosystem, administrators can produce comprehensive reports and analytics without the transformation challenges of fragmented systems.

What to Look for in a Technology-Forward Partner

Infrastructure maturity, flexibility, and security

When selecting a fund administrator, prioritize technology infrastructure. Leading partners invest in enterprise-grade platforms that combine reliability, flexibility, and strong security.

Mature infrastructure ensures uptime, processing power, disaster recovery, and robust change management to prevent disruptions. Flexible platforms support diverse fund types, complex structures, and a wide range of asset classes, including alternatives.

Security is critical amid rising cyber threats. Top administrators deploy encryption, multi-factor authentication, access controls, and continuous monitoring, while maintaining SOC 2 and ISO 27001 compliance.

Ability to scale with complex fund structures

As investment strategies grow more sophisticated, fund structures have become increasingly complex. When considering In-house vs third-party fund administration, look for providers whose platforms already support complex structures like master-feeder and venture capital fund administration.

These systems also scale to diverse investor needs, managing varied fee arrangements, tax treatments, reporting requirements, and side letters, ensuring all investor-specific provisions are accurately implemented and documented.

Conclusion

The technological revolution in fund administration represents both a challenge and an opportunity for investment managers. Those who partner with technology-forward administrators gain significant advantages in operational efficiency, investor satisfaction, and regulatory compliance.

As we look toward the future, tech like AI and machine learning will continue to enhance automation capabilities, while blockchain[1]  and distributed ledger technologies may fundamentally transform transaction processing and verification. Data analytics will grow more sophisticated, providing deeper insights into portfolio performance and investor behavior.

For fund managers navigating this evolving landscape, the choice of a fund administration service provider has never been more consequential. By selecting providers with robust, flexible technology platforms and demonstrated commitment to innovation, they can ensure that their administrative capabilities remain aligned with their strategic ambitions—today and into the future.

Disclaimer: THIS MATERIAL IS PROVIDED FOR GENERAL INFORMATION ONLY, DOES NOT CONSTITUTE INVESTMENT ADVICE, AND PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.

Venture capital firms are facing the most challenging deal and fundraising backdrop in more than a decade. Investment in operational infrastructure is helping managers to navigate it.

In the first half of 2025 global venture fundraising came in at just US$41.6 billion, according to Venture Capital Journal (VCJ), down from US$60 billion over the same period in 2025 and the lowest first half total in eight years. Venture capital investment volume, meanwhile, fell to a record quarterly low of 7,551 deals in Q1 2025, according to KPMG, with the second quarter not much better as a challenging investment backdrop persisted.

A scarcity of LP allocations and transaction flow has thrown venture capital deployment and fundraising schedules out of kilter and intensified competition between managers for capital and deal flow. In the face of these headwinds, operational excellence is becoming point of difference for managers in a competitive market.

A factor in fundraising

For venture firm CFOs and COOs, the growing importance of the back-office as a differentiator when competing for LP capital is a game changer.

Historically the primary predictor of fundraising success was front office excellence and track record, and the ability of managers to identify and execute on the best deal targets and maximize investor returns. The back office was a necessary but primarily administrative function.

There is a general consensus across the industry, however, that CFOs have taken a more strategic role within venture capital firms, with the CFO role expanding beyond fund reporting to include involvement and time spent supporting investor relations, marketing and portfolio management and reporting.

This has been a catalyst for the traditional siloes between the back office and front office breaking down. Operational infrastructure is now a key enabler of front office success, with the CFO and COO setting this interface and participating in the implementation of technology and service provider support to build out of centralized operational processes and data infrastructure that underpin core front office functions.

Indeed, due to the increasing sophistication of the LP base, LPs are paying closer attention to back-office capability when deciding which managers to allocate limited capital resources to. According to Private Funds CFOs 2025 Insights Survey, 36 percent of respondents said LPs were paying closer attention to operational and infrastructure capabilities – up from 22 percent a year earlier.

A robust operating model is seen as a risk mitigator for LPs when selecting managers, as LPs require the managers they back to have the right people, processes and technologies in place to support strong governance and protect firms against downside risk. Alter Domus has noted a steady increase in due diligence requests from investors and prospective investors. These have involved calls, questionnaires and onsite visits to fund administrators.    

A sound operational model is also a key enabler for managers to scale as they stay on top of ever-changing fund structures, co-investment, SPVs, continuation vehicles and special account fund structures.

The venture ecosystem hasn’t been isolated from trends reshaping the wider private markets space, where a wider mix of investors, with varying returns objectives and tax and regulatory obligations, comprise a manager’s core LP base. This includes servicing a potentially growing base of non-institutional investors allocating to venture strategies through semi-liquid and interval structures, which require the management of liquidity sleeves and the more regular publication of net asset value (NAV) marks. Venture managers have been pioneers in development of evergreen and permanent fund structures. Blue chip venture managers, including Sequoia and Thrive Capital, are among the venture firms to have launched permanent capital funds with indefinite fund lives. Some of these funds can hold public stocks, a natural fit for early venture investors in what are now some of the world’s largest companies.

In a market where liquidity is at a premium (distributions as proportion of private markets NAV well to 11 percent in 2024, the lowest percentage in a decade, according to Bain & Co analysis, LPs are also placing premium on managers with the back-office capability to manage capital calls and distributions with maximum efficiency.

Cash-constrained LPs will not want to face capital calls too early or have cash locked up unnecessarily because of a premature call. LPs will also note which managers can expedite timelines for distributions. With distributed-to-paid-in (DPI) now almost as important as IRR for LPs when backing managers, the way firms handle cash management processes, capital calls and distributions, has been elevated from relatively low value, administrative work to a key differentiator for LPs.

The speed of capital calls can also present a venture firm as more attractive in competitive deal auctions and funding rounds. In a deal environment that is low volume and more competitive, having an efficient cash management model (opening accounts, issuing capital calls, funding deals) that doesn’t create a bottleneck or pose as a risk area can make the difference in winning or losing a deal. 

Venture regulatory and reporting demands are also intensifying. In addition to meeting LP expectations for more frequent and granular reporting on fund and portfolio company performance, venture firms are also having to steer through regulatory change, with the next iteration of the EU’s Alternative Investment Fund Managers Directive –  AIFMD II – applying from April 2026, and the US Securities and Exchange Commission (SEC) issuing record levels of financial penalties in the 2024 fiscal year. With data privacy regulation and environmental, social and governance (ESG) compliance also on the venture manager to do list, the regulatory and reporting ask of venture firms has never been more demanding.

The challenge of scaling the back-office

For the venture CFO and COO, who are responsible for laying the foundations and strategic direction of their franchises, an innovative approach to overhauling old expectations of how a firm’s venture back office looks and operates has become necessary to put firms on the right trajectory.

Keeping up with the expanding expectations of the venture capital back-office presents significant cost challenges and complexity for managers, and it is the responsibility of the CFOs and COOs to lead the organizational transformation required to keep their firms in tune with changing market dynamics.

Venture firms have long-operated as nimble, efficient partner-led organizations focused predominantly on deal execution and fundraising. Back-office requirements were relatively light touch and could be handled by small, inhouse teams.

In the current market, CFOs and COOs are under the pressure to determine the best course of action; continue with the in-house model and invest in hiring and growing the team, along with implementing technology to manage increasing operational workload; or partner with service providers.

Exploring the options: insourcing vs outsourcing

Historically venture managers have been slower to adopt an outsourced model than other asset classes.  Venture structures have been relatively straightforward to administer, especially for emerging managers where structures may be simple and the volume of investors per fund small enough to manage effectively inhouse. For many of the smaller VCs, cost sensitivity has been another factor for insourcing.

There is also a sensitivity around confidentiality. Several venture deals will be confidential, which has led to some nervousness about sharing too much information with third-party service providers.

The insourcing model, however, does present challenges that venture CFOs and COOs have to consider.

To keep up with increasing complexity, investor expectations and regulatory demands, back-office teams are leaning more and more on technology, software, process automation and AI tools.  Advances in technology will also be led by many of the companies that venture managers have invested in and are familiar with. As a result, venture managers will be more familiar and comfortable with automation, AI and new technology, and will find technology more valuable and easier to implement.

The private markets industry has already embarked on this technology trajectory, with an industry survey led by Alter Domus and Deloitte recording that well over half of managers are already utilizing digitization and automation in daily operations, and that almost 63 percent anticipate that AI and GenAI will have a significant impact on the alternative investment industry. The survey found that respondents saw streamlining operational processes, enhancing decision-making capabilities, and increasing portfolio performance areas where digitization and tech-adoption should focus.

Keeping pace with tech adoption, upgrading and transitioning legacy technology platforms, and training and recruiting back-office teams that are fit for purpose, however, requires significant upfront capital expenditure that can prove overwhelming for venture managers – especially if this investment would otherwise have been directed into core front office dealmaking resources and recruitment.

According to VCJ, the average venture fund in H1 2025 closed at US$124.5 million, the lowest average recorded in six years. With smaller funds and fee income than other private markets strategies, such as buyouts or private credit, venture firms will often lack the budgets to add to inhouse teams, invest in new technology platforms and retain back-office staff who are being stretched as reporting and regulatory workflows increase.

Outsourcing presents a solution to these capital expenditure and tech-adoption bottlenecks.

Outsourcing fund administration specialists service thousands of managers and funds, across multiple asset classes and geographies, and are thus able to achieve economies scale that enable them to deliver high-value fund accounting, fund administration and investor services as significantly lower costs than an individual venture manager in isolation.

Fund administrators will also be engaging with regulatory and technology developments, on behalf of clients, on a daily basis and have the scale to deploy dedicated teams with deep expertise in these areas to support venture clients.

Outsourcing providers can also advise venture managers on the software and technology platforms best matched to a manager’s deal strategy and investor base, and leverage relationships with technology vendors to roll-out bespoke solutions at competitive price points that can be benchmarked by LPs.

Fund administrators can also provide venture clients with access to proprietary and automation tools that are fit for purpose, allowing managers to reinvest in other aspects of their business. Alter Domus, for example, has invested significant capital in data analytics and workflow automation, which clients can use to drive efficiencies across the back-office. Clients using these tools have reported efficiency gains of between 10 percent and 20 percent.

The evolution outsourcing

The fund administration industry, however, has recognized some of the challenges presented by “old-fashioned” outsourcing arrangements and has tailored services that allow venture managers to retain the ready access to data and institutional knowledge that an insourced model provides, at the same time as unlocking the cost-efficiencies and scale that an outsourced model can offer.

Fund administrators can now provide co-sourcing operating models where data is held in a cloud environment, rather than behind an administrator firewall, and can be accessed by both manager and fund administrator as required.

For CFOs and COOs this removes the friction points of going back and forth to an administrator when fielding LP information requests, but still gives the manager the back-office scalability and cost advantages of an outsourced model.

In addition, co-sourcing makes it easier to switch administrators if a manager chooses to, as the manager retains control of the platform and software its back-office data is running on.

Lastly, another outsourcing model that growing managers have found compelling is the “lift out”.  This involves a number of the manager’s incumbent team leaving and becoming employees of the fund administrator, while continuing to support the same funds they covered in-house. Institutional knowledge isn’t lost, and the manager retains continuity of the team servicing the funds, while putting in place a more scalable and cost-effective operational model for the future. 

Building partnerships

As the venture capital ecosystem faces an operational inflection point, where operational infrastructure evolving from a back-office matter to strategic differentiator, working with a tech-enabled fund administration provider can help venture managers to level up their back-office capability without drawing resources and senior partner attention from the core business of raising and deploying capital and delivering returns to LPs.

Relationships between managers and outsourcers, however, are deepening and becoming more sophisticated, to best meet manager requirements.

A fund administrator is no longer just providing arms-length services and basic support, but serving as long-term partner to managers as their operational requirements develop and change.

Managers will now turn to their fund administrators for advice on the optimum operational model for their organization and support on how to execute business transformation, manage data migration and implement new systems. Fund administrators will also advise on the technology and software that best dovetails with a manager’s operational model and keep managers up to date on regulatory and compliance requirements.

A fund administrator like Alter Domus can provide genuine strategic value to venture capital CFOs and COOs as they navigate the shifting industry backdrop, serving not just as provider of basic support functions, but as an important partner and counsel.

At first glance, the global venture capital market appears to be booming.

Venture capital investment in Q1 2025 climbed to a 10-quarter high of $126.3 billion, rising from $118.7 billion in the previous three months, according to KPMG; some 35 Unicorn assets (start-ups valued at US$1 billion or more) were formed through the quarter, the second highest quarterly total since 2023, according to Pitchbook, and generative AI platform OpenAI landed a record setting US$40 billion funding round at the end of March.

These headline numbers, however, do not tell the full story. Overall venture investment may appear strong, but the asset class has not escaped the fallout from elevated inflation and interest rates, stock market volatility and global trade uncertainty.

Investment value is up, but venture capital deal volume is down. In Q1 2025 only 7,551 deals crossed the line, down from 8,801 deals in the previous quarter and a record quarterly low, according to KPMG. Meanwhile, a Bain & Co analysis shows a 23 percent year-on-year decline in venture capital fundraising, with Pitchbook recording a year-on-year decline in venture capital exit value, which totaled US$322.8 billion in 2024 versus US$331.2 billion in 2023.

A two-tier market

The gap between robust investment activity on the one hand, and falling fundraising and exit value on the other, reflects the emergence of a two-tier venture market that is bifurcating by sector and size.

Perhaps the starkest contrast to emerge is the widening disparity between the red-hot levels of deal activity involving AI-linked companies and start-ups in other sectors.

Indeed, close to a third of total funding round activity in Q1 2025 was generated by the mega OpenAI funding round, with large-language model AI start-up Anthropic another heavyweight contributor to headline numbers, landing a US$4.5 billion funding round raise. Other companies with specific AI-linked capabilities, including KoBold Metals, a developer of AI-powered mining exploration tools, and AI healthcare company Cera, were among the other high-profile performers.

The dominance of AI and machine learning has been such that it accounted for 57.9 percent of combined venture deal value – an all-time record share of the market, according to Pitchbook.

There have been a few other bright spots in the market, most notably in European defense-focused groups, with the Nato Innovation Fund and Dealroom recording a 24 percent rise in investment in European startups focused on developing defense and defense-related technology. Drone maker Tekever and defense software company Helsing have been among the big winners, as European governments and business ramp up defense spending in response to the ongoing Ukraine war.

Investors and dealmakers appear to be doubling down on select segments of the market, upping investment in these areas while putting investment in other areas on hold until macro-economic uncertainty abates. This is one of the main reasons for falling investment volume at time of rising investment value.

Fundraising falters

Macro-economic volatility has also impacted venture capital in a similar way to the buyout space, with volatility making it increasingly difficult to exit portfolio companies at attractive pricing, which then limits the distributions managers are able to make LPs, who in turn have to put the brakes on supporting new fundraising until managers start returning more cash to investors.

This dynamic has shaped what has been a tough fundraising market – which is expected to remain challenging in the near-term as a much anticipated “exit window” is pushed back yet again.

Venture dealmaker had entered 2025 with quite confidence that the year ahead would herald an improving environment for exits, with IPO markets (a crucial exit channel for venture-backed assets) set to reopen as inflation pressures eased and interest rates assumed a downward trajectory.

Escalating trade tension and tariff uncertainty, coupled ongoing conflict in Ukraine and the Middle East, and associated stock market volatility, however, have pushed back any optimism for a wave of exits back to the second half of 2025 at least, or even into 2026.

Venture-backed companies that have test the IPO waters have struggled to land successful listings at stable prices, while other venture portfolio assets that had been gearing up for big-ticket IPOs have delayed their prospective listings due to market uncertainty.

Exiting via funding rounds involving larger venture firms has also been testing, with Pitchbook noting that in the US – the world’s largest venture ecosystem – more than a quarter of funding rounds in Q1 2025 were flat or down rounds (where a start-up raises money at a lower valuation than in previous funding rounds).

There are signs that trade tariff dislocation may be abating, and stock markets have recovered losses from earlier in the year, laying a firmer foundation for potential exits through the second half of 2025. Markets, however, are still choppy, and it will take time for managers to build the necessary comfort to put companies on an exit pathway.

Opportunities ahead… but uncertainty lingers

Through this period of dislocation, opportunities to invest in high-quality, high-growth venture assets will continue to emerge. AI will more than likely continue to dominate deal activity, although defense and cybersecurity startups will also be high on dealmaker target lists.

Other sectors will also present compelling investment opportunity, although in smaller volumes, with cleantech and fintech the sectors outside of AI and defense that dealmakers are keeping an eye on.

Until there is a sense of wide macro-economic stability, however, the bifurcation theme that has shaped the venture investment during the last 12 months will continue to set the tone for market activity through the rest of 2025.