Selecting a fund auditor and tax preparer (Part II)

(Continued from Part I)

Now knowing who the main players are, how does a fund manager select an auditor and tax preparer?  It really depends on two factors:  target investors and budget.

 

If the fund is planning to raise funds from institutional investors, go with Big Four. However, be ready to compete for attention with some multi-billion clients.  For most start-up funds, I will suggest to switch to a Big Four firm when they are ready to market to institutional investors.  Go with a national firm for its nationwide reputation and lower cost comparing to Big Four.  A regional firm if you are planning to focus on raising funds locally.  If your investors care less about a house-hold name and you want to preserve fund performance by saving some operational expenses, try out some other local firms.

 

Other service providers who share same clients with the CPA firms may be a good reference point when you perform the due diligence against the firms.  They may hear something from their clients. 

 

Ideally you want to work with a firm that has a low turn-over rate (so you don’t need to answer the same questions to a different staff every year), expertise in the industry (especially with tax work which can save you real cash), strong commitment to deadline, among everything else.  I will also suggest going for the same firm for both audit and tax services which will typically drive down the costs.

 

I’ve compiled a list of service providers in the hedge fund industry, including auditors and tax preparers.  I will be more than happy to discuss with you which one may be the best choice for your fund.