From complexity to clarity: Managing fund migrations

Introduction  

Fund transitions are inherently complex, high-stakes undertakings that place significant demands on all parties involved, including asset servicers, asset managers, management companies, and incumbent service providers. While transitions often serve as catalysts for functional evolution in asset servicing, they also significantly alter the operational realities of asset managers. Addressing critical challenges early in the project lifecycle is critical to ensure success and effectively mitigate risks.

This article outlines the primary transition challenges, their implications, and strategies to manage them effectively, reflecting a deep understanding of this multifaceted process.

Mitigating migration challenges in fund transitions: Seven areas requiring targeted attention

Fund migrations impact organizations on multiple layers. Here are seven key areas that require specific attention to minimize the risk of failure of such projects.
 

1. Operating model 

The operating model forms the backbone of the relationship between asset servicers and its clients, defining how operations will run post-transition. It typically covers:

• Business architecture and fund service definitions.
• Operational procedures, controls, and oversight mechanisms for specific functions such as fund accounting (FA), transfer agency (TA), custody, depositary / trustee services, reporting, and compliance monitoring.
• Business continuity planning and technology integration.

Creating the operating model is an iterative negotiation process that serves as the foundation for service level agreements (SLAs) and key performance indicators (KPIs). In situations where the required model is not yet fully available, an interim model may be necessary to prevent delays, enabling the migration to proceed in alignment with client and regulatory expectations alongside with commitments to both incumbent and new service providers.
 

2. Team sizing 

Adequate team sizing is pivotal to avoid resource bottlenecks and maintain focus on transition activities without disrupting business-as-usual (BAU) operations. Teams should include representatives from all impacted departments, such as project management, operations, IT, compliance, risk, client voice, and migration strategy. Key roles include PMOs, project stream leads (e.g., operations, technology, client readiness, cross function reporting, legal, change management), business analysts, and testers on all sides.

Reporting needs are often underestimated. Clients may attempt to replicate all internal reports produced by their incumbent, creating substantial workload for the new provider. A detailed assessment of reporting requirements―in contrast with the new provider’s standard offering―is essential. Reports not used anymore should be discharged and often that is where the difficulty lies as report packs have evolved over the years without an inventory of used reports being necessarily managed. Only the true gaps should be subject to development.

Given the distant phases of a transition―analysis, developments, testing, parallel runs, and post-implementation―team size must be dynamically adjusted. Early evaluation of resource needs is paramount to avoid understaffed project components.

3. Operational readiness 

Operational readiness is fundamental to ensuring a seamless transition. Tailored training programs on platform usage, operating procedures, and servicer-specific nuances support rapid adaptation. Documenting impacts on day-to-day processes further enhances preparedness.

These readiness activities should begin in parallel with operating model definition. Fund fact sheets should be finalized and approved before testing begins.
 

4. Platform readiness 

Asset servicers rely on mature functional platforms designed for standardized servicing. Any deviation from the standard offering―whether reporting, data management, or approval processes―requires careful assessment and adaptation of the existing technology environment. Same applies on the asset manager’s side.

Platform readiness includes business definition of any new requested functionality, technical analyses, development, testing, validation, training, and final rollout. A stable platform must be in place before dry-run exercises begin; insufficient preparation introduces significant transition risk with potential impact on delivery date.
 

5. Testing approach 

Testing is crucial to ensure that migration outcomes meet business, regulatory, and operational expectations. A waterfall-style testing framework generally applies, encompassing:

• Stress tests for architecture scalability.
• System integration testing for internal and external connectivity.
• Unit tests for developed functionalities.
• Dry runs for end-to-end business workflows.
• Rehearsals for live migration execution.
• Parallel runs for shadow operations before production deployment.

Testing environments must accurately replicate production, with refreshed data. Clearly defined entry and exit criteria ensure proper progression through each testing phase. Multiple rehearsals are typically required to resolve issues before final go-live approval.

6. Migration strategy 

The migration strategy provides the blueprint for the transition, articulating objectives, dependencies, expectations, and overarching governance. It covers planning, data management, dress rehearsals, NAV reconciliation, and post-migration support, and lessons learned.

Prepared by the asset servicer and reviewed by the asset manager and incumbent provider, the strategy is often requested by regulators to a certain extent. Approval of the migration strategy must precede any testing activities.
 

7. Strong project management and governance 

Large transitions require strong governance supported by a clearly defined project framework.

This begins with a project charter that summarizes scope, stakeholders, and timelines. Agreed guiding principles - enforced by the project manager - set the tone for consistent decision-making. A design authority ensures proper evaluation and approval of key decisions.

A comprehensive waterfall project plan typically includes:

• Governance and oversight structures.
• Business and IT analyses.
• Operational readiness planning.
• Developments rollouts phases.
• Testing and validation checkpoints.
• Staff transition timelines (if applicable) and post-implementation support.

Planning must incorporate contingencies such as holidays, IT freezes, year-end constraints. Project baselining enables accurate monitoring, with escalation protocols for delays. While agile methods can support specific development or reporting needs, the overall transition is best managed through a structured waterfall approach with inter-tasks dependencies correctly configured.

Core project tools, such as project plan, action logs, risk registers, assumption logs, decision logs, and a detailed migration runbook (or microplanning), are critical to ensure the effective management of the project.

Key business impacts of fund administration

Fund migrations affect numerous facets of an asset servicer, requiring adjustments to procedures, system configurations, and operational workflows across multiple functions:

• Fund administration: Pricing policies, reporting requirements, historical data handling, reconciliations.
• Transfer agency: KYC processes, account setup, distributor connectivity, trailer fees management.
• Custody services: Asset list validation, corporate actions, positions reconciliations, broker connectivity, regulatory monitoring.
• Depositary controls: Due diligences management, asset ownership controls, cash monitoring.
• Additional functions: Compliance, risk management, corporate services, auditing, and regulatory engagement.

Success hinges on the ability to balance client-specific needs with broader institutional rollouts while ensuring alignment with the new operating model.

Conclusion 

Fund transitions are inherently challenging due to their scope, complexity, and cross-functional impact on asset managers, asset servicers, and incumbent providers. They test established processes, operating structures, and client/investors interactions. Navigating these challenges requires strong project management and governance, deep subject-matter expertise, robust operating models, well-structured teams that know precisely all parts of the business, effective decision-making bodies, and clear communication among all stakeholders.

By proactively addressing the operating model, team sizing, operational and platform readiness, testing and migration strategies, and business impacts, organizations can significantly reduce risk and support seamless transitions. Continuous alignment, rigorous documentation, and adaptability are essential for achieving a smooth and successful migration.

Many asset servicers have developed sophisticated transition capabilities over time, leveraging experience and iterative improvements to refine their migration frameworks. Nevertheless, clients must also invest the necessary time and efforts to ensure the transition delivers the expected functional enhancements and service improvements.