Fund administration is the back-office work of a private fund: keeping its accounts, its records of investors and the reports that investors receive. Fund administration software is used by private-equity, venture capital and private credit funds, and by fund administrators, the companies that do this work for funds. In India, most such funds are registered with SEBI as alternative investment funds, or AIFs.
A private fund works differently from a mutual fund. Investors do not pay all their money on the first day. Instead, each investor signs a commitment, which is a promise to pay a fixed amount when the fund asks for it. The fund asks for the money only when it is ready to invest. This request is called a capital call, or a drawdown.
Consider a ₹300 crore venture capital fund with 120 investors. The fund decides to invest ₹30 crore in a start-up. The software works out how much each investor must pay. An investor who committed ₹3 crore, which is 1% of the fund, must pay 1% of ₹30 crore, or ₹30 lakh. The software produces a notice for each investor. Investors receive the notice, pay and see their holdings through an investor portal.
The software then keeps the fund's accounts. It records each investment, the fund's fees and expenses, and the money returned to investors when a start-up is sold. Each quarter, it calculates the value of every investor's share of the fund. For this, it needs the latest value of each start-up. Private market data software estimates that value from the start-ups' reports.
New investments arrive from a virtual data room, where the documents of each deal were checked and signed. The fund's reports go to its investors' own systems. A rich family's office receives them in its family office accounting software. A wealth adviser may pull them into wealth aggregation software, which shows all of a family's investments in one place.
AI models now help with this work. They read fund documents, investor statements and bank statements, take out the figures and flag any figures that do not match. An employee in the fund accounting team checks each result before anything is recorded. This is the human in the loop pattern.