The wide acceptance of operational outsourcing among mutual fund providers and the rapid growth of liquid alternatives have transformed the series trust from an operational anomaly to a fund preference in recent years, and why not? Many industry experts say series trusts provide well-documented cost-savings and speed-to-market benefits and give fund managers the ability to focus on portfolio management and asset gathering rather than operational tasks.

While all of those benefits can be realized, they are based on one huge assumption that many managers take for granted - choosing the right series trust. To help managers stuck in the wrong series trust, below are warning signs that may mean you've made the wrong decision and action steps for making a move to a new provider easier.


Consistent Error Rates - Accuracy should be the baseline expectation of a series trust provider. If a fund manager consistently sees errors in the calculation of the daily NAV, expense budget or accruals, those are signs the service provider isn't providing adequate resources for the series trust. Beyond that, a pattern of consistently re-processing shareholder transactions and/or posting a lot of "as-of transactions" likely means the series trust provider is not performing effectively, much less adding value.

Board Competence and Focus - A fund manager wants a board that understands the investment strategy and the risks associated with it, one that asks tough questions and takes part in productive dialogues about its execution.

If the board does not understand your investment strategy your current series trust might not be a great fit. The absence of board interaction may even be worse. You want a board that is focused on your product, not overwhelmed with too many funds and/or fund managers to oversee. Limited direct interaction with the board often means there are too many fund managers in the trust, leaving fund managers to execute without the board's wisdom.

Fund Manager Exists - Fund manager retention can be a key indicator of the quality of a series trust. If the trust loses fund managers and/or funds, it is not only a sign that things aren't working, it will likely lead to an increase in shared expenses. This could cause a fund's expenses to increase disproportionately to its size. More importantly, fund managers should be aware that it may be time to find a better option.

Slipping Service Levels - Service is an important but hard-to-measure aspect of a series trust.

An increase in response time to calls or a drop-off in proactive outreach is a sign that a provider is overwhelmed or unwilling to act as a true business partner. Slipping service levels can be the first sign of larger problems to come and fund managers should take them seriously and assess their options immediately.


While many fund managers may see the warning signs of a faltering series trust relationship, few have an understanding of the steps necessary to make a seamless and painless transition to a new trust. Some specific action steps include:

Review the Current Agreement - First, fund managers must understand the costs and commitment of the current series trust servicing agreement. A fund manager should have an attorney review the agreement to determine what, if any, issues/costs exist with exiting the trust early.

Start a Dialogue With the Board Early - Before fund managers can move their fund(s) to another series trust they must secure the approval of the board and of the shareholders. It is important to begin a dialogue with the board early so they are aware of the fund manager's intentions and can work to get through the process in a timely manner. The board is a voice for the shareholders so its buy-in is critical. The sooner the board dialogue begins, the less likely there will be stumbling blocks along the way.

Use Service Providers as a Sounding Board - Most fund managers are not operations experts, which is often why they choose a series trust in the first place. It's important to use expert service providers as sounding boards during potential transitions.

Credible service providers have been through transitions before and can identify important steps and potential pitfalls. This step makes the process more manageable while helping the fund manager identify and evaluate service providers at the same time.

Weigh a Standalone vs. Series Trust - Exiting one series trust does not mean a fund manager needs to go right into another. The fund manager should take the opportunity to look at their investment and business strategies and consider whether a standalone or series trust best meets their needs. A fund manager may have evolved beyond a series trust - growing too big or looking to launch additional funds that make a standalone trust a necessity. A series trust often looks better from a cost standpoint but a fund manager has to weigh the savings against the autonomy and flexibility that a standalone trust provides.


A series trust is a strong operational model that offers fund managers cost and efficiency advantages. But if they're the wrong fit, business consequences can be significant. When fund managers start to see the warning signs, they can't afford to wait.

Operational inertia has been the undoing of many fund managers with strong investment approaches. Besides, if you know where to begin the transition process, it is not as hard as you might think - the steps above are a valuable place to start.

Dave Carson is president of Ultimus Managers Trust.

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