Outsourcing can free up internal capacity for fund managers, while providing access to deeper expertise and technology. While some in the industry view outsourcing as carrying inherent risks, the reality is that with the right partner, those risks can be effectively mitigated, resulting in a more productive, reliable and scalable operating model. A recent real estate industry report by AREF raised seven potential risks of outsourcing, to which Richard Anthony and Daniel Kalish respond, demonstrating how each can be addressed and transformed into an opportunity for operational excellence.

Real estate fund managers are increasingly outsourcing fund administration functions, including accounting, investor reporting, compliance, and secretarial services, as an alternative to building and maintaining in-house teams. This market trend informed a recent article by the UK’s Association of Real Estate Funds (AREF), which explored the risks and benefits of outsourcing for private fund managers.

What stood out was that not all fund administrators approach outsourcing in the same way. The differentiator lies in how the outsourcing is structured, governed and delivered. Choosing the right partner is often the difference between a smooth, well-governed operating model and one that introduces unnecessary friction.

Below are some of the most common concerns associated with outsourcing, along with how choosing the right approach and a partner with the relevant private markets expertise and technology can effectively mitigate these risks.

You can listen to a recent discussion on the benefits of outsourcing here.

Loss of control

The risk: Outsourcing can reduce organizational control over key processes.

How it is mitigated:

In outsourced models, control is exercised through ownership of outcomes rather than ownership of tasks. For example, managers may retain sign-off, judgment and escalation authority, while administrators execute processes within clearly defined parameters on the manager’s own systems. This co-sourcing arrangement preserves real-time visibility and decision-making while removing bottlenecks and can be treated as a step to a full outsourcing solution.

Operating models should be built around shared systems and real-time transparency, rather than parallel reporting environments. Working on agreed platforms with embedded approvals and audit trails gives GPs visibility and signoff control while delegating execution. This ensures control is exercised through governance, data access and outcome ownership, not duplicated processes or shadow teams.

Key mitigations in practice:

• Clear delineation of responsibilities between GP, Investment Manager and administrator
• SLAs with defined escalation paths and exception handling
• Oversight focused on review and judgment, not replication.

Transition and onboarding

The risk: Migrating historical data, processes and systems under time pressure increases onboarding risk.

How it is mitigated:

Transition risk is addressed through front-loaded preparation. Early design workshops help to clarify roles, responsibilities, escalation points and success metrics. This shared design reduces transition risk and accelerates trust between teams.

This risk is also reduced through technology through structured data migration, controlled cutovers and parallel validation supported by industrialized onboarding tools. Standardized data models, reconciliation checkpoints and configurable workflows allow historical data and processes to be mapped, tested and phased in without disrupting business-as-usual activity.

Key mitigations in practice:

• Structured pre-onboarding discovery
• Detailed process mapping and documentation
• Phased handovers with regular checkpoints.

Quality issues

The risk: The quality of outsourced work may not meet expectations, impacting investor confidence and brand reputation.

How it is mitigated:

Quality depends on responsiveness, proactivity and expertise, and is not an output metric. There’s a clear distinction between “availability” and true responsiveness, highlighting that timely, proactive communication often matters more than having answers fully formed. Taking this one step further, the real value comes when fund administrators go beyond core reporting to support investor interactions, due diligence preparation, and one-off complexities reducing follow-up queries.

Standardized workflows, automated validation checks and exception-based reporting, ensure outputs are accurate, timely and repeatable. For example, our platforms surface issues early, flag anomalies and allow teams to focus on value-added judgment and creating a more predictable service experience. Also, regular team check-ins allow for more efficient collaboration and issue resolution.

Key mitigations in practice:

• Dedicated, knowledgeable service teams
• Proactive issue identification and communication
• Value-add support beyond “business as usual” reporting.

High staff turnover

The risk: Frequent staff changes can lead to loss of institutional knowledge and inconsistent outputs.

How it is mitigated:

Team continuity is repeatedly cited as a cornerstone of service quality. Stable teams that understand a fund’s cadence, structures and investor expectations can anticipate needs and reduce friction.

Technology also plays a critical role in reducing key‑person dependency. Documented workflows, shared systems and embedded controls ensure institutional knowledge is retained both at team and platform level.  This enables seamless handovers, consistent outputs and service continuity even as teams evolve over a multi‑year fund lifecycle.

Key mitigations in practice:

• High staff retention and investment in people
• Consistent team assignment over the fund lifecycle
• Knowledge embedded at team level, not individuals.

Communication barriers and cultural misalignment

The risk: Differences in language, culture, time zones or working styles can hinder collaboration and productivity.

How it is mitigated:

Cultural alignment, which includes shared expectations around communication, escalation and collaboration, should be established early and reinforced regularly.

Shared platforms, integrated reporting and centralized data management create consistent communication across teams and geographies. Common task management reduces friction caused by time zones or working style differences, reinforcing alignment and enabling a fund administrator to operate as a true extension of managers’ internal teams.

Key mitigations in practice:

• Regular cadence calls and touchpoints
• Shared understanding of priorities and timelines
• Cultural fit assessed as part of partner selection.

Data security

The risk: Sharing sensitive financial and investor data with third parties increases exposure to data breaches and security vulnerabilities.

How it is mitigated:

GPs increasingly scrutinise not just current systems, but the control environment behind them. A fund administrator’s technology environment should be designed to minimise manual data handling and enforce embedded controls, access permissions and auditability. Automation reduces risk, while standardized control frameworks strengthen data integrity, giving managers confidence that sensitive information is protected end-to-end.

Key mitigations in practice:

• A shared collaboration platform with the appropriate level of security protocols that reduce reliance on less secure methods like email
• Automated controls and reduced manual intervention
• Ongoing scrutiny of systems and processes.

Turnaround time and flexibility

The risk: Outsourcing can introduce delays and reduce flexibility compared to in‑house teams.

How it is mitigated:

Turnaround time depends more on anticipation than speed alone. In a successful outsourcing arrangement, a fund administrator would understand a fund’s rhythm and pre‑empt requests, while reducing last‑minute pressure. Automation and workflow orchestration provides predictable turnaround times by removing repetitive tasks and surfacing exceptions early, enabling faster, more flexible responses.

Key migrations in practice:

• Agreed upon production schedule to ensure both teams are clear on what needs to be delivered and when
• Stable teams with deep fund knowledge
• Technology that enhances human judgment.

Partnership done right doesn’t need to be about trade-offs. When built around people, governance and aligned incentives, outsourcing becomes an adaptable operating model that evolves with the fund. The research that informed AREF’s article is backed up by the recent Private Funds CFO Insights Survey 2026, in which 43 out of 100 respondents said they intend to outsource more of their fund accounting functions in the next year, aligning with the broader industry trend towards externalizing specialist tasks. This shifts outsourcing from risk to strategic advantage and for fund managers it isn’t a question of whether to outsource, but who to partner with and how that partnership is designed.

Aztec provides full outsource services and we are experienced in building and delivering tailored operating models across multiple jurisdictions. We would be delighted to talk to you about building an outsourcing partnership that works specifically for your business. If you’d like to discuss any of the topics raised, please contact us directly.

Managers looking to build the right operating model for their funds have several factors to consider, one of which is whether to keep the fund administration in-house or outsource part or all of it to an external provider. How much they outsource will depend on their specific needs, with co-sourcing emerging as an option for managers to employ, allowing them to get used to the outsourcing concept while acting as a stepping stone to a fully outsourced model further down the line, as Akbar Sheriff and Scott Kraemer discuss.

Traditionally, fund administration has involved a clear dichotomy: whether to administer fund operations in-house or outsource them to an external third-party. Faced with ever-increasing investor, regulatory, and financial pressures, more fund managers than ever now find themselves looking at the grey area between the two and towards hybrid models, one of which is co-sourcing, a first step for some on the journey to a full outsourced model. One of the main reasons managers outsource or co-source is to free up resources to do more value-add activities, while leveraging the obvious scalability opportunities a specialist fund administrator can provide.

But co-sourcing is not simply a halfway house between the two. Put simply, co-sourcing allows a manager to draw on the knowledge, expertise and resource of a specialist third-party administrator, while retaining as much visibility or control as possible of their operations, usually by having the administrator’s team working on their own in-house systems. Co-sourcing can be good way to start an outsourcing arrangement and is usually a stepping stone to a more complete outsourcing model later down the line. It allows managers to embark on that journey at their own pace, with more processes handed over and solutions provided as the relationship evolves and trust is built. A flexible approach is required on both sides, something not all providers are happy to supply.

In the Private Funds CFO Insights Survey 2026, produced by PEI in partnership with Aztec, fund managers told us about their use of third party providers and that, when it comes to administration tasks, they plan to outsource more in the coming year. Of the CFOs surveyed, 43% said they are looking to outsource their fund accounting in the next year, while 39% said they’d be outsourcing cybersecurity, 38% said they’d outsource their tax administration, and 36% said they’ll outsource compliance within the next 12 months.

You can read a full breakdown of the CFO Survey’s key findings here.

As these results illustrate, outsourcing is increasingly recognized as a strategic advantage for fund managers, and for those who want to refine their operating models and leverage their third-party exposure, co-sourcing can provide a valuable first step.

How does co-sourcing work best?

Typically, what a fund manager needs will be defined and refined iteratively by developing an operating model around the four pillars of people, process, technology, and data exchange. Front of mind throughout this exercise is often the opportunity for operational scalability and its subsequent impact (and, desirably, improvement) on the balance sheet.

Often the arguments for and against co-sourcing focus on outlining its potential benefits, countering with potential drawbacks, and exploring how each factor may contribute to unlocking operational effectiveness and financial upside. However, beyond this cost-benefit analysis is the human element which is the engine room determining the success of any co-sourcing relationship as it develops. After all, best practice outsourcing goes beyond sharing tasks – it builds strong, dynamic relationships that unlock value and opportunity for both sides.

You can listen to our recent podcast on what our clients value in a partner here.

How do people unlock success in a co-source relationship?

As covered in our Future operating models and co-sourcing considered article, the delivery model that a fund manager lands upon along the in-house to outsourcing spectrum will depend on various factors. The case for co-source lies in reducing the perceived compromise required when selecting either of the single-party delivery models, whilst enabling the benefits that both can deliver and offering a measured path to a full outsourcing model. For example, fund manager A may opt to co-source so that they can execute operations on their own platform, whilst retaining a degree of control and gaining access to the specialist talent and extensive industry knowledge of a fund administrator. As a result, fund manager A may then create capacity to increasingly focus on what they consider to be their core competencies, testing their appetite for full outsourcing at the same time.

There are also instances where the GP wants to retain full ownership and control of the single source of their own data, however they don’t have a data storage and usage strategy implemented, yet want real-time access and analysis. One of the ways these GPs can overcome this challenge is through co-sourcing while they develop their own capabilities.

Co-source benefits, whatever the motivation for the arrangement, are only unlocked as the partnership evolves. The first step is to design an operating model driven by a clear challenge statement (i.e., what does the fund manager want to achieve from co-sourcing, and what does success look like in the short, medium, and long-term?). The second, and more iterative step is to then build on this foundation and establish a relationship of trust, openness, and strategic alignment. It follows then that if outsourcing benefits require unlocking, perfecting the people element is key.

All co-source and outsource models are different, but all benefit from a coordinated team:

• Evolving strategic alignment: A partner should be flexible, and actively advocate for the fund manager to evolve, empowering them to respond quickly to challenges and opportunities.
• Skills alignment: Coordinated teams will align on ‘must-have’ requirements, which include system experience or qualifications, trusting the administrator to arrange resourcing appropriately, in some instances, the fund administrator can take responsibility for training any new hires brought into the fund manager’s business.
• Smoother workflows: To ensure efficient handovers, both teams must be aligned on roles and responsibilities, understanding how to maximize the effectiveness of their counterparts along the process flow.
• Accelerated decision-making: Relationships built on trust empower people across teams to make decisions at pace, this avoids unnecessary bottlenecks.

Building your co-sourcing relationship

Creating a strong human connection between the fund manager’s people and your provider’s teams is built on foundations that are established early in the engagement:

Establishing the relationship (Day 1):

• Align on the ‘why’: The provider needs to understand the manager’s strategic vision considering drivers such as employee experience, leveraging in-house technology, managing overheads, and strategic ambitions.
• Introduce positive change: A considered change management approach is key to a galvanized team capable of unlocking the full potential of co-source, and ultimately, outsource.
• Operating model design: Successful execution depends on planning and thoughtful alignment of people, processes, and technology.
• Governance: Establishing a co-source model requires an array of workstreams spanning a range of departments, teams, and third parties, which is why a dedicated project team ensures governance and adherence to timelines.

Developing the relationship (business as usual):

• Building a team: Recognizing a co-source partner as an integral part of the operating model fosters a strong team culture. Leadership should promote this and reinforce it through joint activities and ongoing collaboration, involving both operational and specialist teams.
• Aligned communication: Effective communication within high-performing teams relies on knowing how, when, and with whom to communicate, as well as ensuring timely updates and clear escalation paths. Third-party providers should share the same IT support and escalation framework as the fund manager’s staff.
• Coordinated staffing: Effective staffing in a co-sourcing partnership is reflected through a team built around the appropriate skills and roles. This also smooths the process when the manager decides to move to a full outsource model, this integrated team ensures the success of the migration.

Evolving the relationship (from co-source to full outsource):

As trust is established in the partnership, fund managers can naturally transition from co-source to full outsource:

• Expanding scope and accountability: Responsibility across end-to-end processes increases and progressively shifts to the administrator, reducing dependency on in-house execution. Additional fund structures may also come into scope.
• Embedded people, systems, and governance: Integrated teams, aligned controls, and shared technology frameworks enable the operating model to function beyond co-sourcing.
• Transitioning to strategic oversight: Consistent execution and stable delivery enable the manager to relax their operational involvement to oversight and value-add focus, creating the conditions for full outsourcing.

All co-source partnerships will be bespoke in their operating model, but consistent in their need for an aligned people element. As well as providing full outsource services, we are highly experienced in building and delivering tailored co-source models across multiple jurisdictions to support clients in their transition to full outsourcing and would be delighted to talk to you about developing an operating model that works specifically for your business.

The landscape of risk management for Alternative Investment Fund Managers (AIFMs) is undergoing a profound transformation. Aztec’s Group Head of AIFM Services, Paul Conroy, and Quantyx Managing Director, Michel Lempicki, explain how a partnership approach combining market-leading technology and skilled teams can create a risk management solution which can truly add value.

As regulatory requirements grow more complex and investor expectations rise, the limitations of traditional, manual approaches – often reliant on spreadsheets and fragmented workflows – are increasingly apparent. These legacy methods introduce inefficiencies, heighten operational risk, and constrain scalability. In this context, technology is emerging as a critical enabler, fundamentally strengthening the risk management process and repositioning AIFM services from a regulatory necessity to a strategic value-add.

The case for technology-driven risk management

Historically, AIFMs have managed risk through labor-intensive processes, with data scattered across disparate systems and manual interventions at every stage. This approach increases the likelihood of human error and makes it challenging to maintain robust controls or respond quickly to regulatory changes. The adoption of advanced technology platforms is changing this paradigm. Purpose-built risk management systems automate data aggregation, risk analysis, and reporting, providing a single source of truth and enabling real-time oversight.

One of the most significant advantages of these platforms is their ability to address the unique risk profiles of different asset classes. Unlike generic solutions, leading platforms now offer tailored risk categorization and reporting for the different private asset classes including private equity, real estate, infrastructure, private credit, and fund-of-funds. This granularity is essential, as each asset class presents distinct risk factors and regulatory considerations. For example, the risk analysis required for a real estate fund is fundamentally different from that of a fund-of-funds, and a one-size-fits-all approach is no longer sufficient for sophisticated managers, regulators or indeed investors.

Operational efficiency, regulatory confidence, and human expertise

The benefits of a technology-driven approach extend beyond accuracy. Automation enables AIFMs to scale their risk management functions rapidly, onboarding new funds and strategies without a linear increase in headcount. This is particularly valuable in a market where growth is often constrained by the availability of skilled personnel and the cost pressures associated with regulatory compliance. By adopting a per-portfolio business model, AIFMs can align costs with revenues, scaling up or down as needed and maintaining close control over expenses.

Regulatory scrutiny is another area where technology delivers tangible value. Modern platforms are designed with compliance in mind, incorporating features that support AIFMD and the Digital Operational Resilience Act (DORA) requirements. Automated pre-trade risk clearance, ongoing risk limit monitoring, and data validation against fund risk profiles are now achievable at scale, reducing the risk of breaches and ensuring that controls are consistently and timely applied.

Yet, technology alone is not enough. The partnership between Aztec Group and Quantyx exemplifies how combining cutting-edge technology with teams of industry-specific experts creates a bespoke managed partnership optimized for all private markets asset classes and strategies. This tech-enabled risk management solution is unique in the market today, evolving as tech capabilities do, and is distinguished by close collaboration to deliver best-in-class risk reporting at both fund and asset levels.

Data management, integration, and client-centric excellence

A critical component of effective risk management is the ability to aggregate and exchange data seamlessly across systems. Technology platforms that offer integrated data management capabilities eliminate duplication, reduce manual intervention, and support more accurate and timely reporting. For larger AIFMs, the investment in data exchange infrastructure is justified by the scale of their operations, but even smaller managers benefit from solutions that streamline workflows and facilitate collaboration with service providers.

The human dimension remains vital. Teams interpret data, anticipate challenges, and provide strategic guidance, transforming a tech-enabled service into a client-centric managed solution. The solution includes risk assessments at fund and asset levels, covering both qualitative and quantitative key risk indicators (KRIs) tailored to specific strategies. Data are pulled from underlying fund documentation, collected and stored in the software application.

Freeing people from repetitive tasks necessary for efficient fund administration means more time to focus on building relationships, solving complex problems, and delivering value beyond compliance.

Integrated risk management: real-world impact

Clients benefit from real-time risk monitoring and robust compliance frameworks, reducing exposure and enhancing investor confidence. Automation eliminates duplication and manual intervention, delivering faster turnaround times and cost savings without compromising quality. Seamless data exchange between systems ensures accurate reporting and clear audit trails. Whether managing a single fund or a complex portfolio, the model adapts seamlessly to client requirements, which supports scalability.
Built on a robust Microsoft Azure infrastructure and leveraging Aztec SharePoint, Quantyx’s risk management platform offers deep integration capabilities, supporting multiple private asset classes, to meet the highest regulatory standards possible. Enhancements are driven by user feedback and a commitment to operational efficiency and regulatory excellence.

The future evolution of AIFM services

Just as technology evolves, so too must AIFM services. Among the enhancements we expect to come are:

• Enhanced workflow automation: Streamlined data exchange and reporting, reducing friction and improving user experience.
• Client access to risk dashboards: Plans are underway to provide clients with direct online access to risk analytics, empowering them with greater transparency and control.
• Advanced AI data extraction capabilities: use of LLMs will hasten the extraction and controls to further improve data validation mechanisms.
• Information security and compliance upgrades: DORA’s regulatory requirements mean continuous investment in the application which in turn strengthens the AIFM infrastructure.

The alternative investment industry faces more complexity and compliance requirements as investment opportunities open up to a wider pool of investors, investor expectations become more granular, and market volatility becomes the norm. Harnessing technology to better manage these risks and reporting requirements is essential to remain competitive. The partnership between Aztec Group and Quantyx is a prime example of how technological agility and human expertise come together to innovate and lead change.

Technology is reshaping the AIFM risk management landscape, offering the tools needed to enhance accuracy, efficiency, and strategic value. By embracing purpose-built platforms and fostering collaborative partnerships with technology providers and expert teams, AIFMs can meet the challenges of today’s regulatory environment and unlock new opportunities for growth and differentiation.

If you’d like to discuss how AIFM services are evolving, please contact us directly.

This article first appeared in the LPEA’s magazine, Insight/Out, you can read it here: PRIVATE EQUITY INSIGHT/ OUT #37

For U.S. private markets sponsors planning pan‑European fundraising, Luxembourg has become a favored option because it combines regulatory credibility, cross‑border reach, flexible structuring, and deep servicing expertise within a single, scalable platform. Marcia Rothschild and Angel Ramon Martinez Bastida list the domicile’s virtues.

In Preqin’s Private Markets in 2030 report, European focused private funds assets under management (AuM) is forecast to reach $5.8tn by 2030, up from $3.1tn at the end of 2024, an average annual growth rate of 11%. This forecast is driven by investor appetite across the region, most notably for the infrastructure, private credit and private equity asset classes for which Preqin expects the strongest growth rates.

In their latest report on fund domiciles published in June 2024, Preqin noted that 57% of all European private capital raised in 2022 was domiciled in Luxembourg, up from 25% in 2017 and only 8% in 2011. Our analysis of Preqin’s data shows that Luxembourg’s share as a domicile for European private capital remained at a market leading level of around 50% for 2023, 2024 and 2025.

More detailed data analysis shows that U.S. private markets managers are increasingly using Luxembourg as their European fundraising base. Monterey Insight’s Luxembourg report for private market assets shows that the number of U.S. fund managers with Luxembourg-based structures has grown more than 75% since 2020, with a corresponding increase in AuM in Luxembourg-based fund structures up over 200%.

These significant growth numbers, coupled with Luxembourg’s well-respected regulatory framework and efficient distribution network, are why Luxembourg consistently emerges as an effective long‑term platform for raising capital across Europe. From our perspective as a fund administrator supporting U.S. managers, these are the 7 reasons why the domicile remains a premier gateway to Europe:

1. A distribution hub built for the passport era

If your goal is to reach professional investors across many EU member states, Luxembourg lets you do that with one set‑up. EU‑authorized AIFMs based in Luxembourg can market their AIFs to professional investors throughout the EU/EEA under the AIFMD marketing passport, typically via a 20‑day notification workflow. In practice, the passport replaces a patchwork of country‑by‑country filings with a harmonized regime, dramatically simplifying campaigns that span Germany, France, the Netherlands, the Nordics and beyond.

Luxembourg also leans into pre‑marketing, the EU’s “test‑the‑waters” regime introduced by the Cross‑Border Distribution of Funds (CBDF) package, so managers can gauge interest before activating full marketing notifications. In our recent webinar, Fundraising in Europe 101 Part 2: Demystifying regulation, we emphasized that pre‑marketing should be viewed as a way to accelerate a successful Luxembourg launch. Testing demand under pre‑marketing provides the confidence to activate the passport with clarity around target jurisdictions and investor appetite. Several member states apply identical rules to non‑EU AIFMs too, which helps U.S. managers operating via Luxembourg AIFMs or distributors to plan reliably.

What it means: With a Luxembourg AIFM and the passport, one launch can cover many countries without the uncertainty of National Private Placements Regimes (NPPR).

2. Investor‑friendly scale

European institutions want scalable, reputable frameworks. Luxembourg is Europe’s largest fund center and number two worldwide, a status confirmed across industry and regulatory sources. Recent industry body reports put net assets of Luxembourg‑domiciled funds in the €6 to 8 trillion range, underscoring depth and resilience. CSSF monthly data showed €6.19 trillion at end‑December 2025, while ALFI’s combined UCITS/AIF view for October 2025 reached €7.95 trillion.

In cross‑border distribution, Luxembourg is the clear leader. The 2025 ALFI/Broadridge study found €7 trillion in global cross‑border fund AUM by December 2024, with Luxembourg accounting for nearly half.

What it means: Luxembourg’s scale creates a shared reference point for European LPs. Familiarity with Luxembourg vehicles consistently translates into faster and smoother due diligence cycles, removing friction at the LP level.

3. Structure once, sell widely

Luxembourg’s legal toolbox mirrors U.S./UK LP economics while aligning with EU fund rules:

SCSp (special limited partnership): contractual flexibility akin to Delaware/UK LPs; tax transparent; widely used for flagship funds, feeders, co‑invests, carry vehicles and acquisition SPVs.

RAIF (Reserved AIF): “speed‑to‑market” vehicle (no prior CSSF authorization) supervised indirectly via its AIFM; open to multiple strategies and forms; and with broad adoption.

SIF, SICAR, and Part II UCIs: used where authorisation or retail interfaces are desired; often combined with the SCSp form for familiar governance.

The ELTIF 2.0 regime has further expanded the toolkit for semi‑liquid, long‑term vehicles that can be marketed to retail investors under specific protections many of which are being launched out of Luxembourg. Luxembourg hosts the majority of Europe’s ELTIFs, positioning the domicile for strategies targeting retail private markets access.

What it means: U.S. managers can replicate their preferred LP/GP dynamics (capital calls, waterfalls, advisory committees) within EU‑passport-able wrappers, speeding investor onboarding across jurisdictions.

4. Regulatory credibility with pragmatic implementation

Luxembourg’s CSSF is seen by global sponsors as both robust and pragmatic. It has been an early mover on UCITS and AIFMD, and has already transposed AIFMD 2.0, with changes that impact delegation and authorization. The changes revolve around disclosure to investors and reporting; a new loan origination regime; liquidity management tools; more freedom for depositaries; and non-EU AIFM marketing under a NPPR.

On macro stability, Luxembourg remains AAA‑rated by Moody’s, S&P, and Fitch, an important trust marker for 20‑year funds courting pension and insurance balance‑sheet capital. The CSSF’s annual report also underscores the jurisdiction’s policy predictability and commitment to cross‑border capital markets, which is precisely the environment long‑dated private strategies need.

What it means: European investors place a premium on regulatory predictability and clarity. Luxembourg’s approach and framework are well understood across the institutional market.

5. A sophisticated servicing ecosystem

Luxembourg concentrates administrators, depositaries, audit/tax advisers, AIFMs, and specialist counsel across alternatives, giving U.S. managers a deep bench for launch, operations and scaling. With funds registered and sold in more than 80 countries, this cross‑border distribution expertise translates into smoother workflows for registrations, investor reporting and regulatory updates when your distribution map spans double‑digit jurisdictions.

What it means: Luxembourg’s deep service ecosystem streamlines complex cross‑border workflows, reducing operational friction so teams can focus on fundraising and investment execution.

6. Tax neutrality

For cross‑border investor pools, the goal is neutrality to avoid economic double taxation and instead let investors be taxed in their home jurisdiction. Luxembourg’s partnership vehicles (e.g., SCSp) are typically tax transparent; fund‑level exemptions exist under multiple regimes; and the country’s double tax treaty network is extensive. These features are widely documented by auditing firms and specialist counsel and are a key reason European pension and insurance LPs are comfortable with Luxembourg vehicles.

What it means: This lets managers offer global LPs a tax‑neutral, institution‑friendly structure where investors are taxed in their home jurisdictions.

7. Retailization and semi‑liquid product options

If your strategy includes semi‑liquid private markets for qualified retail or wealth channels, ELTIF 2.0 now provides workable redemption calibration and liquidity tools opening new distribution paths across Europe under a harmonized product label. Luxembourg has been fast out of the gate in authorizing ELTIFs, and so the jurisdiction has a dominant share of ELTIFs to date.

What it means: ELTIFs give managers a credible, Europe‑wide, semi‑liquid, private markets wrapper, with flexible liquidity, diversified asset buckets, and a Luxembourg ecosystem already leading authorizations.

How Aztec can help

For U.S. fund managers planning to fundraise in Europe, a specialist fund administrator with a proven track record in Europe, a significant presence in Luxembourg and hands-on experience supporting U.S. managers on both sides of the Atlantic becomes an invaluable guide. A third-party expert can efficiently manage the process of setting up European operations, handling the heavy lifting and taking on the critical tasks necessary to ensure compliance with European regulations, smooth operations, and effective fund management on an ongoing basis.

In our experience, managers that engage early with the right partners are best positioned to execute efficiently and scale with confidence. We would welcome a conversation on how Aztec can support your expansion into Europe. Please contact us directly.

Forty-three percent of GPs say they plan to outsource more of their fund accounting functions in the next 12 months. This headline finding from our 2026 Private Funds CFO Insights Survey highlights a growing trend: outsourcing is no longer just about efficiency – it’s a path to achieving greater resilience, accuracy and strategic focus.

In this episode of Alternative Insight, ‘Making outsourcing work: The critical success factors’, Aztec’s Akbar Sharif is joined by Melanie Cohen, an independent consultant to private equity fund managers, and Richard Day, COO at Schroders Greencoat, to examine how GPs are rethinking their operating models and what separates successful outsourcing partnerships from the rest.

During this episode they discuss:

• The need for flexible operating models
• How clear governance and shared expectations set partnerships up for success
• Why responsiveness and continuity matter more than ever
• How managers can retain oversight while outsourcing execution
• The growing impact of automation and integrated data on reporting quality.

Listen to the Alternative Insight podcast episode:

Listen to “Making outsourcing work: The critical success factors” on Spreaker.

If you like what you heard, head to Spotify, Apple Podcasts or wherever you listen to podcasts, find Alternative Insight podcast by the Aztec Group and hit the subscribe button, so that you receive all future episodes as soon as they’re published!

Podcast disclaimer:
This recording has been prepared by the Aztec Group and is made available by Spreaker for and on behalf of the Aztec Group for private or non-commercial use. By accessing this podcast you acknowledge that the entire content and design of the podcast are the property of the Aztec Group and are protected under applicable laws and should only be used for private or other non-commercial use. You further acknowledge that neither Spreaker nor the Aztec Group provide any warranty, guarantee or representation as to the accuracy or sufficiency of the information featured in the podcast. Information and opinions are provided for general information purposes only and do not constitute legal or other professional advice. Any reliance you place on such information is strictly at your own risk. For full details please click here.

In an exclusive article, originally published by ACI, Kevin Hogan and Andrew Tully share how technology is transforming the entire fund lifecycle and the importance of leaders embracing an ecosystem mindset to define the next era of private credit.

For years, technology in private credit was synonymous with a single question: “What accounting system do you use?”  That choice became shorthand for operational sophistication. Today, that choice is obsolete.

The most advanced private credit fund operations aren’t defined by a system of record but by an integrated digital ecosystem, a platform that spans onboarding, loan servicing, banking, reporting, analytics, workflow automation, and data delivery. As private credit has expanded in scale, complexity, and investor expectations, the operational model has undergone a fundamental shift. Technology is no longer a functional necessity. It’s the infrastructure that shapes the end-to-end lifecycle of the fund.

The friction point: When investor onboarding breaks the experience

Investor onboarding remains one of the most critical, and historically painful, events in private credit operations. LPs often encounter repetitive information requests, lengthy email chains, fragmented communication, and uncertainty over what’s required and when. For deal driven strategies, these inefficiencies can be more than inconvenient: they can delay fund launches, extend closings, and create avoidable stress for both investors and managers.

But more importantly, onboarding is the first impression. Investors don’t differentiate between administrative workflows and the manager’s overall professionalism – the experience is one and the same. A clunky process signals disorder. A smooth, structured, guided onboarding journey signals competence.

When onboarding is digitized, built around workflows, transparency, and data reuse, the impact is immediate: fewer delays, fewer emails, less investor frustration, and a relationship that begins with confidence instead of friction. For an asset class built on trust and long-term capital commitments, that early experience matters.

Loan engines + accounting: The core of the modern ecosystem

Private credit portfolios are inherently operationally intensive. Loans amortise, draw, reset, toggle between cash and PIK interest; covenants must be tracked; fees accrue in multiple dimensions. Historically, much of this complexity was managed outside the accounting system, in spreadsheets, emails, and disconnected loan tools, forcing teams to reconcile the world manually each quarter.

Modern operations are built on event driven loan engines tightly integrated with the general ledger, ensuring:

• Loan events are captured once and flow seamlessly into accounting
• NAV is a real-time reflection of economic reality
• Waterfalls and distributions are accurate because the underlying data is accurate
• Audit trails are inherent rather than constructed.

As strategies diversify into specialty finance, ABL, NAV lending, and structured credit, the need for this unified core becomes even more pressing. It is the foundation for operational quality.

Breaking portals: The new centre of cashflow control

Treasury operations in private credit require precision and control. Funds often work with multiple banks across currencies, structures, geographies, and vehicles. Without the right technology, operations teams must jump between portals, coping with inconsistent interfaces, varied controls, and limited visibility. The result is increased operational risk, slower processing, and reduced transparency.

A unified banking portal environment solves this fragmentation. Instead of navigating disparate bank systems, teams operate through a single, secure digital interface that centralizes:

• Payment initiation
• Approvals and segregation of duties
• Cash position visibility
• Standardized controls across all banks
• Stronger protection against error and fraud

This centralized treasury capability becomes indispensable as private credit grows more complex and transaction volumes rise. It enables operational resilience while reducing the cognitive load on teams.

Automation: Driving middle and back-office efficiency

Digital transformation has reshaped the middle and back office more than any other area.

Invoice and AP automation now leverage AI to read, code, validate, and route invoices with minimal human intervention. This dramatically reduces manual effort, cycle times, and exceptions – especially valuable in multi-fund, multi-jurisdiction environments.

Data integration and analytics tools harmonise loan, cash, accounting, investor, and operational datasets. What once required hours of reconciliation now runs automatically, allowing teams to focus on exceptions, insights, and strategic tasks rather than administrative toil.

Combined, these tools free capacity, reduce errors, and strengthen the accuracy of downstream reporting.

Reporting and data on demand: From documents to dynamic insight

Reporting in private credit used to mean static, backward-looking, and slow-to-produce quarterly PDFs. But investors now expect something fundamentally different: timely, contextual insight available whenever they need it, not when the quarter allows it.

This is where modern data and reporting platforms have changed the game.

Managers increasingly rely on dashboards that provide real-time operational visibility across the fund: loan performance, cash forecasting, borrower exposure, covenant headroom, capital activity, and more. These dashboards are governed following best practice modeling, standardized metrics, consistent definitions, and secure access roles, ensuring that all stakeholders see a single version of the truth.

Beyond the quality of reporting outputs, safe, secure and on-demand accessibility to reporting is now the expectation for investors. Portals are no longer just static libraries; they serve as gateways to timely insights, empowering investors to engage with information whenever and however they choose.

The evolving role of a fund administrator

In this new ecosystem, fund administrators have become far more than accounting providers. The best administrators today act as technology partners, integrators, and operational stewards, bringing three distinct strengths:

1. In-house technology experts: Specialists who configure systems, maintain integrations, build workflows, optimize reporting environments, and design data architecture tailored to each client.

2. Ongoing investment in platforms: Administrators invest in obtaining, maintaining, and upgrading best-in-class tools so their clients don’t have to. This includes loan engines, reporting platforms, workflow systems, investor portals, and analytics tools.

3. A scalable operating model: They ensure operational quality across jurisdictions, fund structures and strategies by harmonising people, processes, and technology.

The right administrator continuously improves the operating ecosystem, helping managers adapt to regulatory changes, industry standards, and evolving investor expectations.

Conclusion: A new definition of operational excellence

Private credit’s operational transformation is about designing and orchestrating a connected digital platform that supports every stage of the lifecycle – from onboarding to reporting, from loan servicing to treasury, from workflow automation to investor engagement.

Technology has become the infrastructure through which private credit managers demonstrate professionalism, scale confidently, protect investor relationships, and deliver operational excellence.

Those who embrace this ecosystem mindset, supported by administrators who bring expertise and sustained investment, are the ones defining the next era of private credit.

This article was originally published in the Alternative Credit Investor publication, which you can read here.

The private credit market has entered its most turbulent phase in more than a decade. After years of rapid expansion and steady returns, cracks in confidence have started to appear. The bankruptcy of First Brands last fall set off what commentators jokingly – but tellingly – called the hunt for “credit cockroaches”: the idea that if one borrower defaults, more may be lurking in the shadows. Combined with falling interest rates, which have eroded the appeal of floating‑rate yields, perception has quickly shifted.

Yet while the reaction has been sharp, it’s important to maintain some perspective: the asset class as a whole remains fundamentally sound, with most managers reporting stable credit performance and robust underwriting discipline.

But sentiment matters, particularly for retail investors who have entered the private credit space more recently. A combination of market noise, falling interest rates and headline‑driven concern has prompted some to redeem first and analyze later. And this instinct has collided with the rapid rise of semi‑liquid fund structures, which provide periodic redemption opportunities but invest in assets that cannot be sold on the same timetable.

The result: a handful of high‑profile cases where semi‑liquid funds have experienced redemption requests beyond what their structures are designed to accommodate. These are not signs of deep structural weakness in private credit. Rather, they highlight the well‑known tension between investor expectations and asset‑level liquidity – a tension observed in other asset classes before.

A perfect storm — but not a structural failure

Several forces have combined to create today’s pressures:

1. A confidence shock at an awkward moment

First Brands’ collapse generated a wave of questions across the industry, even for managers with minimal to no exposure. Investors, particularly those less familiar with private markets, reacted strongly to perceived rather than actual risk. Importantly, many managers continue to report stable portfolio performance and no material deterioration in credit fundamentals.

2. Falling rates and changing return dynamics

The easing of base rates has reduced the elevated yields enjoyed during the recent peak. Yet while income levels have normalized, relative value remains compelling versus public credit, and many allocators view this recalibration as a healthy return to long‑term norms rather than a reason for alarm.

3. Retail behaviour amplifying short‑term volatility

Most retail investors come from a world of daily‑priced, daily‑liquid products. When negative headlines emerge, redemption activity can spike regardless of underlying asset performance. This behavioral pattern – as opposed to systemic credit deterioration – has intensified pressures on the semi‑liquid segment.

Crucially, these dynamics are not unique to private credit. The real estate segment has been here before, too. Several high‑profile real estate funds have faced liquidity crunches and gating during previous market swings. In those cases, asset level fundamentals often remained solid, but the mismatch between redemption terms and underlying liquidity proved destabilising. The lessons from those episodes – transparency on liquidity limits, robust stress‑testing, clear investor education and careful expectation management – apply directly to today’s environment.

Why retail‑sold private credit carries predictable tension

The challenges facing semi‑liquid private credit funds were not unforeseeable. Private credit’s strengths have historically relied on two pillars:

• The illiquidity premium, which rewards investors for holding assets outside public markets
• Limited mark‑to‑market volatility, allowing managers and investors to look through short‑term noise.

Once private credit is packaged into products designed for retail distribution, some degree of liquidity must be offered – and that immediately introduces a structural contradiction:

• The appeal of private credit stems partly from not being priced daily
• Yet periodic liquidity windows create the perception of daily‑liquid pressures.

This contradiction played a major role in past real estate gating events – investors rushed for the exit not because assets were collapsing, but because they feared being the last ones left inside the gate. The same psychology is visible in private credit today.

Semi‑liquid funds remain private‑market vehicles

The current environment reinforces a central truth: semi‑liquid funds are still fundamentally illiquid private market structures, even if they offer periodic access. Four realities stand out:

1. Liquidity is conditional, not guaranteed as private credit assets cannot be sold instantly without discounts. Liquidity windows are designed for most scenarios, not all.
2. Valuations lag fast‑moving sentiment because NAVs are estimates, not real‑time prices.
3. Redemption controls protect investors, just as they did in real estate funds during stress. Gates preserve value.
4. These vehicles belong in the illiquid bucket, even with quarterly liquidity.

These are features, not flaws, and they mirror the experience of other asset classes that have navigated similar tensions. The real estate examples of the past make clear that when liquidity expectations run ahead of asset realities, even well‑managed portfolios face short‑term pressure.

The industry’s real challenge is expectation management

The recent wobble is less about credit risk and more about bridging the gap between investor expectations and private market reality. As with the real estate gating instances, the underlying portfolios did not suddenly deteriorate; sentiment shifted faster than liquidity measures could be implemented.

Managers who embrace clearer communication, transparent liquidity frameworks and more proactive investor education will be better positioned to weather these cycles.

Why this matters for managers

Periods of market stress place significant pressure on operating models. Semi‑liquid funds in particular demand precision in liquidity oversight, valuation governance and investor servicing. Outsourced fund administrators can help managers navigate this environment through:

1. Liquidity and redemption operations

Cash‑flow modelling, redemption‑queue management and scenario analysis help managers anticipate pressure and avoid forced asset sales.

2. Independent valuation governance

External oversight provides discipline and credibility during periods of heightened investor scrutiny, a key lesson from past real estate gating events.

3. Scalable investor servicing

Stress periods see surges in investor queries and processing demands; outsourced support prevents operational bottlenecks and maintains confidence.

4. Structuring and design expertise

Cross‑cycle experience helps refine liquidity frameworks, disclosures and distribution practices, exactly the kind of refinements real estate funds implemented after their own gating episodes.

5. Practical insight into semi‑liquid fund behaviour

Administrators with real‑world experience across market cycles can help anticipate friction points and guide managers through them.

A long‑foreseen test arrives

The private credit industry was always going to be stress‑tested once retail distribution reached scale. Many predicted the issues we are seeing today. The case studies we’ve seen to this point didn’t create the problem; they revealed them, clearly, publicly, and in real time.

Semi‑liquid structures still have a powerful role to play in broadening access to private markets. But their sustainability hinges on aligning expectations with reality. That requires clarity, transparency, strong operational foundations and ongoing education. Additionally, if retail investors aim to construct a well‑balanced, diversified portfolio, they can meet their liquidity requirements from other more liquid assets including cash positions, interest‑bearing debt, and periodic, systematic drawdowns from long‑term investments, easing the burden on their private credit holdings.

72% of GPs say LPs now prioritise clear, timely and accurate reporting above all else.

This is a headline finding from our 2026 Private Funds CFO Insights Survey, which we did in partnership with PEI, and highlights just how quickly investor expectations are evolving.

In our latest episode of the Alternative Insights podcast, Maria Von Oldenskiold, Head of Investor Services, is joined by special guests Gary Haselgrove, Head of Alternative Operations at USS, and Stefanie Langer Principal and COO at Corten Real Estate, to explore how rising LP scrutiny is influencing operational models, performance expectations and the overall investor experience.

During this episode they discuss:

• The growing demand for transparency and responsiveness
• Which performance benchmarks LPs are focused on today
• How managers are adapting their operating models
• Practical steps to strengthen investor confidence through better reporting.

Listen to the Alternative Insight podcast episode:

Listen to “Great expectations: A new era of LP scrutiny” on Spreaker.

If you like what you heard, head to Spotify, Apple Podcasts or wherever you listen to podcasts, find Alternative Insight podcast by the Aztec Group and hit the subscribe button, so that you receive all future episodes as soon as they’re published!

Podcast disclaimer:
This recording has been prepared by the Aztec Group and is made available by Spreaker for and on behalf of the Aztec Group for private or non-commercial use. By accessing this podcast you acknowledge that the entire content and design of the podcast are the property of the Aztec Group and are protected under applicable laws and should only be used for private or other non-commercial use. You further acknowledge that neither Spreaker nor the Aztec Group provide any warranty, guarantee or representation as to the accuracy or sufficiency of the information featured in the podcast. Information and opinions are provided for general information purposes only and do not constitute legal or other professional advice. Any reliance you place on such information is strictly at your own risk. For full details please click here.

The publication of Circular CSSF 25/901 marks a decisive moment for Luxembourg’s alternative investment sector. Overall, it changes the supervisory environment for those managing common structures with the emphasis on proving compliance throughout the fund lifecycle. Angel Ramon Martinez Bastida and Abdelhak Kembouche explain the main changes, what managers need to do now, and the opportunities that this Circular brings. 

While introduced under the banner of consolidation and modernization, Circular CSSF 25/901 goes far beyond administrative tidying up. It represents a significant revision of how Luxembourg’s regulator expects SIFs, SICARs and Part II UCIs to articulate, execute, and evidence their investment strategies. For Boards, AIFMs and Conducting Officers, it signals a shift toward a more structured, disciplined and transparent supervisory environment – one where principles that once tolerated interpretation now require demonstrable proof of compliance.  

The Circular entered into force in December 2025. However, its rules do not apply to closed-ended funds that were already authorized before that date. Open-ended funds authorized before the entry into force may continue applying their existing rules until their next prospectus update, at which point they can choose to align with the new framework. Any new funds created after 19 December 2025 must comply with the Circular from day one.   

You can read a comprehensive Paperjam interview with Angel Ramon Martinez Bastida here.  

Main changes

1. A unified, modernised framework

Circular CSSF 25/901 replaces a patchwork of historic texts with a single, coherent governance and product framework. This consolidation is not merely administrative; it represents a new regulatory philosophy. By harmonizing terminology and expectations across fund categories, the Circular strengthens comparability, reduces interpretive ambiguity and enables the regulator to apply supervisory principles more consistently. 

This unified framework also introduces a more structured articulation of investment intent. Strategy descriptions can no longer rest on generic labels or broad asset class references. Managers must now demonstrate the rationale behind their strategy, how it fits within the SIF, SICAR or Part II UCI perimeter, and what internal controls ensure alignment throughout the fund’s lifecycle. This means clearer rules of engagement, more transparent methodologies and a more predictable supervisory dialogue.  

2. Risk spreading becomes explicit, measurable and continuous

One of the most transformative elements of the Circular is the move from qualitative principles to quantified diversification thresholds, calibrated to the investor base: 

• 25% maximum exposure for retail accessible products 

• 50% for funds distributed only to professional or well-informed investors 

• Higher allowances for infrastructure investments (50% if distributed to retail investors and 70% if distributed to professional or well-informed investors) and funds of funds (if the underlying meets an equivalent 50% cap). 

This introduces both clarity and obligations, and ramp-up and wind-down periods are also formalized, offering flexibility tailored to the nature of the strategy. However, these periods must be justified and monitored, ensuring that temporary deviations from target diversification remain reasonable and well controlled.  

3. Governance expectations are raised: Boards must demonstrate active oversight

Circular CSSF 25/901 strengthens the responsibilities of Boards and managers, making their oversight role more explicit and more demanding. Decision-makers must be able to demonstrate: 

• Understanding of the strategy’s regulatory positioning; 

• Active review of concentration risk, leverage and liquidity; 

• Scrutiny of intermediary vehicle structures; 

• Challenge of deployment, divestment and exit assumptions; and 

• Engagement with risk spreading and risk capital limitations.

The Circular effectively formalizes supervisory expectations that have been implicit for years: governance bodies must be knowledgeable, involved and able to articulate how regulatory obligations translate into operational reality.  

This heightened oversight requirement also demands stronger documentation, including rationale notes, approval trails, scenario analyses and periodic reporting to the Board. In a more evidence driven world, well-kept records become a regulatory asset.  

4. SICARs: A sharpened definition of “risk capital”

 For SICARs, the Circular clarifies the concept of risk capital, placing emphasis on development intent and active value creation, as well as a credible exit plan. 

 To qualify, investments must exhibit: 

• A clear intention to develop the target; 

• Specific risk beyond general market exposure; 

• Governance involvement or value creation initiatives; and 

• Financing aligned with the evolution of the target entity. 

Passive ownership structures – especially those relying solely on financial engineering or holding company arrangements – will find it harder to justify SICAR eligibility. Exit strategies must be explicit, realistic and aligned with the investment thesis, reinforcing the timebound, development driven nature of the regime.  

5. Transparency, investor protection and operational resilience

Transparency obligations are significantly strengthened. Policies, offering documents and internal procedures must now explicitly detail: 

• Asset classes and investment techniques; 

• Use and structure of intermediary vehicles; 

• Borrowing and leveraging frameworks; 

• Liquidity management and redemption tools; 

• Treatment of temporary cash; and 

• Conflicts of interest and calculation methodologies.

These requirements demand deeper alignment between investment, risk, compliance and operations, ensuring that disclosures match actual practice and that supervisory expectations are met across all functions.  

This shift also enhances investor protection. For long-life structures or funds with multi-year lockups, disclosures must make illiquidity risks and redemption constraints transparent and proportionate to the target investor base.   

What managers need to do now

As Circular CSSF 25/901 moves from publication to implementation, managers must address four priority areas: 

A. Documentation upgrade

Prospectuses, PPMs, policies and risk frameworks will need restructuring to reflect the Circular’s detailed expectations. Generic or high-level statements must be replaced with precise descriptions, thresholds, methodologies and controls. 

B. Governance reinforcement

Boards must adopt more rigorous oversight mechanisms, including concentration dashboards, liquidity trend analyses, leverage monitoring tools and periodic deep dive reviews. 

C. Operational integration

 Risk spreading monitoring, look through analysis, exposure aggregation and exception logging will require robust operational processes and enhanced data flows. 

D. Training and culture

Teams across portfolio management, risk, compliance and operations must internalise the Circular’s logic. Training becomes essential to ensure consistent application across functions.  

An opportunity for Luxembourg

Circular CSSF 25/901 makes Part II UCIs, SIF and SICAR more attractive and strengthens Luxembourg’s broader alternatives ecosystem, with RAIFs using these frameworks as benchmarks. While it raises compliance expectations, it delivers clearer rules, modernised flexibility and more coherent governance standards. For managers willing to adapt early, it is an opportunity to strengthen governance, build investor trust, reduce interpretive risk, harmonize processes and align with evolving European supervisory trends. A strategic reset for managers that can translate into real competitive advantage. 

How Aztec can help

The regulatory bar continues to rise, and early preparation will be key to avoiding last-minute challenges and ensuring filings are accurate, complete, and audit ready. Choosing an experienced and knowledgeable partner like the Aztec will help ensure that your operations are fully aligned to the requirements of the Circular. 

If you want to discuss any of the points raised here, how these will affect your operations, and how the Aztec can assist with the changes, please contact us directly. 

Written by Muhammod Khan, Fund Controller, Pontoro and Simon Ware, Product Associate Director.

The rapid digitization of private markets continues to open up investment opportunities for a larger, more diverse pool of investors, giving GPs more flexibility to manage liquidity and source alternative capital, while giving investors access to previously out-of-reach, higher-yield investments through innovations such as tokenization. Fund administration too has been revolutionized by the advent of digital assets and to remain relevant in a rapidly changing industry, fund administrators need to continually adapt and enhance their solutions.

As private markets evolve, leading managers are increasingly turning to technology, particularly tokenization, as an innovative way to unlock capital and enhance liquidity. But to fully appreciate where the industry is heading, it’s worth remembering how far it has come.
As this revolution picks up pace, it’s hard to imagine that as recently as the early 1990s, fund accounting and administration was largely manual and completed via Excel spreadsheets. Custody required the physical safekeeping of stock certificates, and fund audits often included the auditor’s onsite presence at the custodian bank to perform a physical count of the stock certificate inventory. The practice of issuing physical stock certificates dates back 400 years. While it seems crazy to think about, this practice did not end until DTC (Depository Trust Company) was developed in the 1980s and the shift to electronic trading and digital records began. The shift revolutionized trading and the investment fund industry.

Today, tokenization is revolutionizing the way private market assets are bought, sold, and managed. This process involves creating a digital representation of a real-world asset (RWA), also known as a token. By converting fund interests or underlying assets into tokens, investors gain greater flexibility, improved market access, and the ability to fractionalize ownership. For managers, tokenization streamlines distribution, enables access to new sources of alternative capital, and broadens their investor base.
There are many benefits of tokenization in the private markets, but a key one is enabling fractional ownership. By breaking down these large, often illiquid holdings into smaller, more fungible units, a broader range of investors can participate in the market. This fractional ownership not only democratizes access to high-value assets but also facilitates easier and faster transactions. This, combined with greater operational efficiencies and modernizing and leveraging new types of intermediaries, reduces the barriers to liquidity. As all transactions are recorded on an immutable ledger, the inherent security of blockchains enhances trust amongst investors.

While these innovations promise greater efficiency and market participation, they also introduce regulatory and operational considerations. This is where fund administrators play a crucial role in ensuring compliance and integrating these solutions into existing financial structures. It’s important to distinguish between funds holding digital assets, such as cryptocurrencies or tokenized securities, and the tokenization of the fund structure, where investor interests in the fund are issued and managed as blockchain-based tokens. Each model presents unique opportunities and challenges. This is where fund administrators are critical to ensure operational and regulatory integration.

Implementation of tokenization and blockchain

With new regulatory frameworks being put in place and large institutions allocating capital to tokenized assets, tokenization is a significant technology trend. For fund administrators it is an imperative to develop and maintain a compelling and competitive service offering to remain relevant for clients and to protect revenues. As the investment fund world continues to shift from traditional LP interests to digitized fund tokens, it will be the role of third-party providers, whether they are fund admins, AIFM or custodians, to provide the necessary controls and oversight that protect both the fund managers and LPs interests.

Regulatory Compliance

One of the primary responsibilities of fund administrators is ensuring regulatory compliance. Unlike traditional assets, tokenized instruments often sit at the intersection of securities law and emerging digital asset regulation, creating a complex compliance environment. While regulatory frameworks for decentralized finance (DeFi) and crypto assets are still evolving, initiatives like the EU’s Markets in Crypto-Assets Regulation (MiCAR), US’s GENIUS Act, UAE’s Crypto Token Regime, Hong Kong’s Virtual Asset Trading Platform Framework, and Singapore’s Payment Services Act are beginning to provide structure.

According to Andrew Henderson of Goodwin & Proctor UK LLP, MiCAR effectively removes the distinction between crypto-assets that fall under MiFID II and those that do not. As he explains, “same activities, same risks, same rules” and “technology neutrality” are now the guiding principles shaping EU oversight of digital assets. This means custody and administration standards for tokenized assets are converging rapidly with those of traditional financial instruments.

In the United States, a similar step was taken in July 2025 with the enactment of the GENIUS Act. As highlighted by Jeremy Senderowicz of Goodwin & Proctor US LLP, the statute creates “a comprehensive regulatory regime governing the issuance of payment stablecoins in the United States and providing for the regulation and supervision of payment stablecoin issuers.” Complementing this, the President’s Working Group on Digital Assets has outlined further priorities for legislation, while the SEC has shifted its position by moving away from treating most cryptocurrencies as securities and instead approving listing standards for cryptocurrency exchange-traded products on major U.S. exchanges.

As the asset management industry penetrates the high-net worth market, regulatory scrutiny will only increase. Fund administrators must be alert and adaptable to the evolving regulatory landscape and ensure tokenized fund structures align with both existing securities regulation and emerging digital asset rules.

Custody Considerations

Under the EU’s MiCAR and MiFID 2 frameworks, crypto-asset custodians must be licensed and meet strict standards on cybersecurity, asset segregation, and governance. The UAE, Hong Kong and Singapore have adopted similar regimes, requiring regulated custodians and institutional-grade safeguards. In contrast, there is currently no unified federal framework in the US – tokens could be regulated either as securities (SEC) or commodities (CFTC), though clarity is expected soon under the new administration. To accommodate these differences, fund managers and administrators should provide appropriate oversight and consider partnering with regulated custodians, using digital asset vaults, and utilising multi-signature wallets to protect assets and meet evolving regulatory expectations.

AML Considerations

Since tokenized fund interests can be transferred more efficiently, administrators need to implement on-chain identity verification. They can integrate automated AML screening tools that cross-check investors against sanction lists, politically exposed persons (PEPs), and suspicious activity databases. Additionally, smart contract-based compliance controls such as the ERC3643, can restrict transfers to only verified investors, preventing unauthorized or illicit transactions. Using segregated digital wallets or accounts for each investor further strengthens compliance by ensuring clear ownership records and isolating potentially suspicious activity. This can also facilitate the provision of liquidity to LPs who need an exit by automating and streamlining the LP transfer process. By embedding real-time monitoring and reporting mechanisms, fund administrators can ensure that tokenized funds comply with global regulations while enabling seamless investor transfers in a secure and efficient manner.

Skills & Education

As the fund administration industry adapts to the rise of tokenized assets and blockchain-based infrastructure, upskilling staff is a strategic priority. Working with digital assets requires a new blend of technical literacy and regulatory awareness, including the basics of blockchain mechanics, smart contracts, custody models, and evolving frameworks like the EU’s MiCAR. To meet these demands, admins are investing in training programs to equip teams with the skills needed to support on-chain transactions, real-time data flows, and token-based fund structures. This shift is not just about technology but about building a workforce capable of navigating the complexities of digital finance while maintaining the same rigour and oversight expected in traditional fund services.

Fund Administration Benefits

Blockchain revolutionizes Net Asset Value (NAV) calculations by enabling real-time asset tracking through on-chain transactions, ensuring that fund valuations remain accurate, transparent and up to date. Smart contracts can automate large portions of the NAV calculation process, reducing the reliance on manual reconciliations and eliminating errors, and improving the overall quality and integrity of data. The immutable ledger provides a tamper-proof audit trail, enhancing transparency and regulatory oversight.

Additionally, in a future with commonly adopted digital currencies, programmable smart contracts offer streamlined dividend and distribution payments, execution of automatic payouts based on pre-defined conditions. This not only eliminates delays caused by traditional banking systems, but also ensures instant and transparent earnings distribution, while reducing administrative costs. On-chain payments can eliminate counterparty risk by embedding delivery-versus-payment logic into smart contracts. This ensures, that asset transfers and payments occur simultaneously and irreversibly, making the entire process more secure for managers, administrators, and investors. The role of fund administrators will inevitably shift from a commoditized function to a value-adding partner – providing deeper analysis, and more dynamic, real-time reporting.

The Future of Private Markets: Better Liquidity Solutions

Tokenization and DeFi solutions are reshaping private markets, offering investors greater access, enhanced efficiency, and improved liquidity. As blockchain adoption accelerates, fund administrators will play an increasingly important role in the adoption of these solutions, bridging the gap between traditional finance and the new digital assets world – ensuring compliance, integrating new technology, and facilitating secondary market access. These developments promise to digitize private market investing, reduce friction, and create more globally accessible and liquid opportunities for both fund managers and investors.

If you’d like to find out more about alternative capital sourcing or how tokenization and blockchain solutions can enhance your business and how you invest, contact us directly.

About Pontoro

Pontoro is a fintech company focused on transforming the private markets by leveraging blockchain technology to bring greater liquidity, efficiency, and transparency. Its patented platform enables the tokenization of LP interests, making more asset classes more accessible through fractional ownership and digital distribution. By building the full tokenization value chain, they are unlocking secondary market liquidity and enhancing price discovery. Pontoro empowers asset managers, fund administrators, and investors to participate more efficiently in the private markets.

How Aztec can help

If you’d like to discuss support for your digital assets strategy or any of the other themes raised in this article, please contact us.

Below is a selection of the questions our attendees asked following our webinar, European fundraising 101 Part 2: Demystifying regulation, held last month. Our expert panel comprising Matt Brahaut, partner at Carey Olsen, Marc Schubert, partner at Weil, Gotshal & Manges, and Aztec Group’s Marcia Rothschild, European Desk Head, have pooled their experience to answer them comprehensively.

1. If managers have set up in Luxembourg but realize that may not have been the best choice, can they migrate to another jurisdiction, is that practical?

Yes, absolutely! Establishment in Guernsey is quick, simple and cheap. There are not huge capital requirements so there is not a vast duplication of the expenses that are incurred in Luxembourg. As a full‑service provider across Luxembourg, Ireland, Jersey and Guernsey, Aztec supports managers through the entire migration process to ensure continuity and minimal disruption. Early planning is key, and having an administrator that can support you across multiple jurisdictions materially simplifies execution.

2. The passport regime was referred to as theoretical a couple of times, why? Is it really as simple as obtaining home country approval and you can market anywhere in the EU?

The AIFMD marketing passport allows for marketing to professional investors in all EU countries, however, it is only available to EU managers fully licensed under AIFMD. A license application requires on the ground staff, compliance with various regulatory requirements (including regulatory capital, reporting, valuation, governance, etc.) and can take months to obtain. An alternative to obtaining your own license is to partner with a host platform provider, such as Aztec. We can help managers navigate these obligations in practice and enable faster access to European investors without unnecessary operational strain.

3. Isn’t tax a fundamental issue when it comes to where you set up? If the fund invests in Spain, for example, it may not like the presence of Guernsey/offshore? Does the same hold true for Jersey?

Tax is a fundamental consideration in any fund structuring decision and should be assessed as part of a holistic analysis alongside regulatory, investor and operational factors. While we are unable to comment on the specific tax treatment by Spain of investments made by or into a Guernsey or Jersey fund, managers should seek advice from their tax advisors to assess jurisdiction‑specific implications and investor sensitivities at an early stage.

4. For pre-marketing, is it a requirement to engage with an EU service provider first or after finding genuine interest in a non-EU fund?

If looking to set up an EU fund structure and obtain the AIFMD marketing passport in conjunction with a host platform provider, a notification will need to be made to the relevant EU regulator within two weeks following the start of “pre-marketing” (broadly, contacting investors about the specific fund product). This will generally need to be done by the AIFM of the fund (i.e. the host platform provider) – in practice we have seen such providers willing to assist with these notifications prior to their formal appointment. Certain conversations with investors can take place without triggering the notification requirement and, if looking to set up a multi-jurisdictional fund structure, there may be other work arounds.  Aztec regularly supports managers at the pre‑marketing stage by advising on operational readiness, reporting frameworks and regulatory timelines across multiple jurisdictions. This early alignment helps managers move quickly from investor interest to launch – take advice early to explore your options!

5. For a first-time manager entering Europe, what are the most common mistakes you see when choosing between Luxembourg, Ireland, and offshore options like Guernsey?

The most common mistake we see is people simply going to Luxembourg without having carefully investigated whether a Guernsey fund is a viable alternative (which it can be). From our experience, the most successful structures are those aligned with the manager’s investor base, strategy and long‑term growth plans. As a full‑service provider across multiple jurisdictions in Europe, Aztec helps managers compare options holistically and select a structure that is both investor‑friendly and operationally efficient.

You can read our comprehensive guide for U.S. fund managers raising funds in Europe which features the expertise of our Aztec team along with a selection of experts in the area.

You can watch the full webinar recording, ‘Fundraising in Europe 101 Part 2: Demystifying regulation’, here:

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Globalized investment landscapes mean private fund managers are under continued pressure to accommodate diverse investor bases, cross-border deal flows, and multi-currency capital structures. Kevin Hogan and Matt Horton break down the benefits, challenges and operational nuances of multi-currency funds

The forecasted growth across private markets, projected by Preqin to be $29.2 trillion by 2029 and breaching $30 trillion by 2030, is indicative of the fact that more investors than ever are looking to access private asset classes. Indeed, the retailisation of private markets and the continued growth of semi-liquid fund structures is the result of an increasingly diverse investor base, keen to benefit from potential returns of private assets.

Another trend pointing to this – and one we’ve noticed among our own client base – is the increased use of multi-currency funds, which allow investors to commit capital in their preferred currency. This flexibility simplifies the investment process for LPs but introduces operational complexity for managers.

Although multi currency funds aren’t new, the way the market perceives and operates them is changing, driven by a shifting balance of power between LPs and GPs and a more complex global fundraising environment. Investors expect greater optionality and customisation, prompting GPs to accommodate a wider range of share class currencies and hedging structures to broaden their investor base and maximise fundraising potential.

The changes GPs are making, however, come with significant operational and administrative implications, from daily FX exposure monitoring to more advanced treasury management and the heavier reporting burden compared to single currency funds. This is where service providers play a critical role by guiding clients through market practice and operational demands, ensuring accuracy and efficiency.

Understanding the structural choices behind multi-currency funds is essential to unlocking scale, efficiency, and investor satisfaction.

What is a multi-currency fund?

A true multi-currency fund is a single legal entity that accepts capital commitments in multiple currencies, typically through distinct share classes or sleeves. This contrasts with a multi-currency structure approach, such as master-feeder or parallel fund setups, which involve separate legal entities for each currency or investor type.

Multi-currency funds benefit LPs as they simplify the investing process, however they can create operational complexities for the manager. Multi-currency funds introduce foreign exchange (FX) risk, bring jurisdictional tax rules into focus, while managers need to provide sleeve-level reporting, and deal with multi-currency capital calls. These factors are nuanced depending on whether the manager is raising capital from differing investor bases, for example U.S. institutions, European family offices, or Middle Eastern sovereign wealth funds. And as potential pools of capital expand to include new classes of retail investors, so too will the complexity of remaining compliant and operationally transparent, while meeting evolving investor needs.

How do multi-currency funds work in private markets?

Structurally, multi-currency funds include currency segmentation, with individual sleeves for each currency allowing for tailored capital accounting, performance tracking, and reporting. Capital calls and distribution notices are issued in the investor’s committed currency and processed by the funds’ administrative systems, with NAVs then calculated per sleeve.

What benefits do multi-currency funds offer managers?

1. Broader investor appeal

Multi-currency structures allow managers to attract global LPs who prefer investing in their local currency, reducing friction and FX concerns for the investor. It also makes it easier to scale across geographies.

2. Operational efficiency vs. complexity

Compared to master-feeder setups, single multi-currency funds are often simpler to operate when currency is the only differentiator. This can mean lower setup and administrative costs, as well as unified governance and portfolio management.

3. Investor segmentation

Managers can meet diverse investor needs (e.g., regulatory or tax requirements) without creating separate funds for each group.

What are the challenges for fund managers?

The most critical challenge in multi-currency funds is managing FX exposure. For example, adding hedging layers potentially introduces unintended consequences, such as the risk of certain investors exhausting capital commitments due to FX movements, which means GPs need to ensure fund documents are drafted to best address these complexities. It also means GPs and administrators need to track and potentially adjust positions more frequently than the traditional quarterly or semi-annual reporting cycles. All these considerations add cost, as well as additional operational and audit requirements. These, coupled with the need for specialized knowledge, make multi-currency funds more challenging for smaller fund managers.

There are several strategies managers can employ to deal with this, including:

1. Natural hedging

Match investment and revenue currencies to reduce exposure organically.

2. FX derivatives

Use forwards and options to hedge currency risk at a fund or sleeve level.

Hedging costs include roll costs (interest rate differentials), transaction fees, and collateral drag.

3. Hedge ratio design

Managers choose how much exposure to hedge based on portfolio composition, investment horizon, and market volatility.

4. Manual buffers & reconciliation

Manual conversion buffers are applied to capital calls, accounting for FX fluctuations between notice and payment dates.

5. Investor-level allocation

Profits and losses from FX hedging are allocated to investors based on their currency exposure and sleeve participation.

What other operational factors do managers need to consider?

Successfully managing multi-currency funds requires attention in four key operational areas:

1. FX risk management

Effective hedging strategies, such as forwards or natural matching, must be supported by scenario modelling and treasury oversight to mitigate currency volatility.

2. Currency segmentation

Distinct sleeves for each currency require separate capital accounts, performance tracking, and reporting frameworks to ensure clarity and prevent cross-contamination.

3. Capital calls and distributions

Calls and pay outs must align with the investor’s committed currency, supported by automated systems that reduce manual errors and ensure timely execution.

4. Technology enablement

Platforms must support sleeve-level accounting, real-time cash tracking, and investor dashboards to deliver transparency and operational control.

Comparing multi-currency options

As private markets continue to expand globally, fund managers must balance flexibility with efficiency. Whether opting for a single multi-currency entity or a multi-structure approach, the goal remains the same: to meet investor needs while maintaining operational clarity and cost control.

As investors’ expectations evolve, so too must the architecture of the funds that serve them. Choosing the right structure is the foundation of a successful investment strategy. By combining deep regulatory expertise, advanced technology platforms, and a global operational footprint, specialist administrators can help managers setup and run multi-currency structures that are compliant and tax-efficient, as well as transparent, scalable, and investor-friendly.

If you’d like to discuss your multi-currency fund requirements in more depth, please contact us.