Glossary · Fund Accounting
Shadow Accounting
Shadow accounting is the practice of maintaining an independent set of fund books, in parallel with the administrator's, to verify NAV, P&L and fees.
In shadow accounting, the manager (or a provider acting for the manager) keeps its own books and records for each fund and compares them with the fund administrator’s output at every valuation point. The shadow books typically cover positions, cash, accruals, expenses, management fees, performance fees and share-class or investor allocations.
The purpose is control, not duplication. Differences between the shadow NAV and the administrator’s NAV are investigated and resolved before the manager signs off, catching pricing errors, missed trades, incorrect fee calculations and allocation mistakes before they reach investors. Shadow books are also useful when switching administrators, because they provide a validated starting point for the parallel run.
Common pitfalls include building shadow books with the same data feeds and assumptions as the administrator (so errors replicate rather than surface), setting tolerance thresholds too wide, and failing to document how each difference was resolved. Fundtec runs shadow accounting as part of its managed investment operations: an independent set of books on our platform, kept by a dedicated team.
Related terms
Where this comes up in our work
Shadow Accounting
Your administrator produces the official NAV. Fundtec keeps an independent set of books alongside it, so you know the number is right before invest…
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Changing administrator is a controlled migration of books, investors and history. We run it in four gated phases, with a parallel run before anythi…
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