Managed Investment Operations
Shadow accounting that checks every NAV before you sign it
Your administrator produces the official NAV. Fundtec keeps an independent set of books alongside it, so you know the number is right before investors see it.
In one minute
Shadow accounting is the practice of maintaining an independent, parallel set of fund books alongside the appointed fund administrator, so the manager can validate the NAV, prices, fees and P&L before sign-off. Fundtec provides shadow accounting for hedge funds, private credit and private equity managers as part of its managed investment operations: independent books on our proprietary platform, Tychi, kept by a dedicated Fundtec team.
Managers and administrators who need dedicated operating capacity inside their own systems, without adding permanent headcount.
A 30-minute scoping call, then a written plan: scope, the transition timeline and indicative pricing. No generic proposal.
What shadow accounting is and why managers run it
Shadow accounting means the manager keeps its own version of the fund’s books and compares them with the administrator’s before approving the NAV. It is the manager’s independent check. Administrators make errors like any operations team: a missed corporate action, a wrong price source, a fee calculated on the wrong base. The manager signs off the NAV, so the manager carries the reputational risk.
Institutional investors increasingly expect it. Operational due diligence questionnaires ask how the manager oversees its administrator, and SEC examination staff commonly ask registered advisers the same question. A documented shadow process with a monthly sign-off pack is a direct answer. Fundtec runs shadow books as part of its managed investment operations, with a dedicated team that knows your funds.
What Fundtec’s shadow accounting covers
- 01
Independent books
Trades, positions, cash, income and expenses booked independently from source data, not copied from the administrator.
- 02
Pricing validation
Every position priced to the fund’s pricing hierarchy and compared with the administrator’s price.
- 03
Accruals and expenses
Interest, dividends, fund expenses and budgets accrued and compared line by line.
- 04
Fee verification
Management fees and performance fees recalculated by class, series and investor.
- 05
P&L allocation
Income and gains allocated across share classes, series and capital accounts.
- 06
Sign-off pack
A NAV comparison with every difference explained, ready for CFO approval.
How the monthly shadow NAV cycle works
Trade and position capture
Trades and corporate actions are booked from OMS, broker and custodian data into the shadow ledger.
Reconciliation
Cash and positions are reconciled to prime brokers and custodians before valuation. See our reconciliation service.
Valuation
Positions are priced independently and compared with the administrator’s prices; exceptions are investigated.
Accruals and fees
Income, expenses and fees are calculated independently, including crystallization events.
NAV comparison
Shadow NAV is compared with the administrator’s NAV at fund, class and investor level.
Resolve and sign off
Differences are raised with the administrator, resolved or explained, and the sign-off pack is issued.
Dual NAV tracks: shadowing two administrators on different timelines
Managers with funds at more than one administrator often face different NAV calendars. An illustrative example of how a shadow team keeps both tracks under control.
| Stage | Fund at Administrator A | Fund at Administrator B |
|---|---|---|
| Administrator NAV timing | Early in the month (around business day 5) | Later in the month (around business day 20) |
| Shadow NAV ready | Before Administrator A’s draft arrives | Ahead of Administrator B’s draft, reusing month-end prices already validated |
| Comparison focus | Pricing, accruals, fees on a compressed timeline | Investor-level allocations, equalization and series detail |
| Sign-off pack | Issued within the agreed SLA after draft receipt | Issued within the agreed SLA after draft receipt |
| Common benefit | One set of validated prices and positions used for both funds | Consistent fee and allocation logic across administrators |
Fee verification: management fees, performance fees and crystallization
- 01
Management fees
Recalculated on the correct base (NAV, commitments or invested capital), with offsets, waivers and side letter terms applied.
- 02
Performance fees and high-water marks
Accrued by class, series or investor against the high-water mark and any hurdle rate, with loss carryforwards tracked.
- 03
Crystallization
Crystallization on period end and on redemptions checked so fees are paid only when due.
- 04
Equalization and series
Equalization credits and series accounting roll-ups verified so each investor bears the right fee.
What the sign-off pack contains
- Shadow vs administrator NAV at fund and share-class level
- Position and price comparison with differences over tolerance
- Accrual and expense comparison
- Management and performance fee recalculation
- Investor-level capital account comparison where in scope
- Open items log with administrator responses
- Sign-off recommendation for the CFO
Engagement model
How an engagement is structured
Economics aligned to your growth. Scope, cadence and pricing are confirmed jointly in the first phase.
- 01 · Weeks 1–4
Onboarding & design
A phase-linked fee covers process mapping, the operational handbook, systems access and the SLA framework — before any handover.
- Target operating model
- Operational handbook
- SLAs agreed jointly
- 02 · From the parallel run
Monthly base fee
Your dedicated team, pod manager oversight and the governance cadence — daily huddle, weekly review, monthly service review, QBR.
- Named PM → SME
- Trained backup for every role
- Governance included
- 03 · As you grow
Scales with AUM
AUM-linked tiers and pre-agreed triggers for new mandates or counterparties — so growth never means renegotiating the contract.
- Transparent triggers
- No renegotiation
- Quarterly pricing review
Every engagement starts with a scoping call — no obligation, no generic proposal.
Request an indicative proposalQuestions
Common questions about Shadow Accounting
Didn’t find your question? Put it to a specialist directly.
Ask a specialistFrequently asked questions
How is shadow accounting different from fund administration?
The fund administrator produces the official NAV and investor records. Shadow accounting is the manager’s independent check: a parallel set of books used to validate the administrator’s numbers before sign-off. Fundtec does not replace your administrator; we give you evidence that its NAV is right, or a documented list of what needs correcting.
Do SEC-registered advisers need shadow books?
There is no specific rule requiring shadow accounting, but registered advisers are expected to oversee service providers and value assets appropriately, and examination staff commonly ask how that oversight works. Many advisers use shadow books as their documented answer. Fundtec does not give legal advice; confirm your obligations with compliance counsel.
Does shadow accounting delay our NAV?
It should not. Fundtec builds the shadow NAV before or alongside the administrator’s draft, so comparison starts as soon as the draft arrives. The sign-off pack is delivered within an agreed SLA. In practice, managers often sign off sooner because differences are already explained when the draft lands.
Can you shadow funds at two different administrators?
Yes. Fundtec runs dual tracks for managers whose funds sit with different administrators on different NAV calendars. Validated prices and positions are shared across both, while fee, allocation and investor-level checks follow each administrator’s timetable and methodology. Each fund still receives its own sign-off pack.
Which fees does Fundtec verify?
Fundtec recalculates management fees on the correct base with offsets and side letter terms, and performance fees by class, series or investor against high-water marks and hurdles. We check crystallization on period end and redemptions, equalization adjustments and series roll-ups, and flag any difference to the administrator before the fee is paid.
What systems do you use for shadow books?
Fundtec can run shadow books on the client’s own accounting platform or on Tychi, Fundtec’s proprietary operations platform with a double-entry general ledger and automated accruals. Clients on Tychi pay no per-seat licence fee. Either way, data stays in the client-controlled environment and outputs are delivered by portal, SFTP or email.
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Tell us your funds, administrators and NAV calendar. We will show how a shadow cycle would run and what the sign-off pack would contain.