How To Make Managing Investor Funds Easier With a Fund Administrator

For this episode of "Raise Private Money Legally," we welcome special guest John Ruszkowski from Opus Fund Services, who discusses how and when you need a professional fund manager, and how having one will elevate your credibility with investors and make your life easier.

Episode at a glance:

• How a fund administrator helps ensure your peace of mind
• How and when you need a fund administrator
• How having a fund administrator will elevate your credibility with investors

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Transcript

Edited Transcript: ‘What is a Fund Administrator and Why Do You Need One?’

With special guest John Ruszkowski

Kim Lisa Taylor:

Welcome, everyone, to Syndication Attorneys' free monthly podcast, where we talk about topics of interest to real estate syndicators with the opportunity for live questions and answers at the end of the call. I am Attorney Kim Lisa Taylor. Before we get started, please note that all of our podcasts will be recorded and may be used for future promotion, posted on our website, or a broadcast in a podcast available to the public. If you don't wish to have your voice recorded, don't raise your hand. Instead, you can put questions in the chat. We will do live Q&A at the end of the call. If you do have a legal question you'd like to ask, you can schedule a one-on-one consultation with us at our website, syndicationattorneys.com. You'll see a button you can click to schedule a consultation and you'll get some options for scheduling a call with one of the attorneys or one of our staff, and we'd be always happy to talk to you.

Information discussed during this free podcast is of a general, educational nature and should not be construed as legal advice. Today, our topic is “What is a Fund Administrator and Why Do You Need One?” So I guess we've got a couple of alternate topics. That was one of them. And the other is really “Making Managing Your Funds Easier With a Fund Administrator” because that's just a huge thing that people don't realize — that managing a fund is a little different than managing a syndicate. And so we've got our special guest, John Ruszkowski of Opus Fund Services, and he's going to tell us all about that and how his company works and what kind of services you need to make your fund management go a little more smoothly. So John, welcome. Welcome to the show.

John Ruszkowski:

Thanks, Kim. Thanks for having me.

Kim Lisa Taylor:

Yeah, happy to. Well, so some of you may remember that John was scheduled to come on, I think back in April, right? And he canceled at the last minute because his wife was having a baby. So we excused him for that. We said, “That's really cool!”

John Ruszkowski:

Listen, I tried to make it work. I tried to negotiate and unfortunately my wife won, as per usual.

Kim Lisa Taylor:

Yeah, yeah, that's just a non-negotiable thing. So totally understand. We're excited. Congratulations on the new baby, and we're happy that you are able to come back. So tell us a little bit about yourself and Opus Fund Services.

John Ruszkowski:

Sure. I've been with Opus for a little over seven years now. I've been in the alternative investment space for the better part of about 15, 16 years. I've kind of zigged and zagged my way through different client-facing roles, business developments, relationship management, did some project management and then landed here at Opus in 2016. It's been a great ride so far. Opus, we are obviously a fund administrator. We've been around since 2008. We started out — we'll call it almost exclusively as kind of the more public securities type of administrator — but throughout the years we've morphed into more of a generalist type of role, if you will. So we've included private equity real estate, we do some venture capital administration as well, but real estate has been probably over the last four or five years has been a big driver of our business. So glad I'm able to join you over here today.

Just in terms of our clientele, we have about 750 funds that we administer for, spread across about 500 unique investment managers. In terms of size, we're pretty focused on funds that are going to be new launching. New launches are about 80% of our new revenue each year. Size-wise, we're not afraid to take chances on small managers. I mean, that's kind of our bread-and-butter is the startup and really early-stage emerging manager space, I would say under a $100 million is probably a good fit for us. But again, not afraid to propose or partner with clients that are going to be more closer to $10 million, $25 million. That's really what helps keeps the lights on for our business.

Kim Lisa Taylor:

So would it be fair to say that a $10 million fund is maybe your starting point or would you actually consider managing a fund that was smaller than that?

John Ruszkowski:

Yeah, we would certainly consider starting smaller. I mean, it really depends on the aspirations of the manager, as long as they're willing to incur our fees, which I think are pretty reasonable. And really, look, I think most folks at that size, if they're looking to get a good institutional infrastructure in place, administrator's going to be a core partner in that. So really depends on what they're looking for. But certainly, yeah. Size is not a restriction for us. It just is a matter of whether or not the manager sees an administrator as being essential to the success of their business.

Kim Lisa Taylor:

Well, and it can certainly add credibility to the fund manager if they're using a fund administrator because their investors have that additional comfort level knowing, “Hey, this guy's not trying to go it alone and figure it out for the first time out by himself. He's got some support and some back end.” So that I think is critical, especially for new fund managers because a lot of the people that come to us, they're immersed in real estate, they're real estate investors and they need money to be able to do their real estate investments, but they aren't really willing or able to make the transition to being a fund manager, which by itself could be a full-time job because they still want to do the real estate.

So having a service like yours could be a tremendous boost to somebody who is really focused on the real estate, needs the money, wants to do the fund, thinks they can raise the money, but they just don't have the time to sit and do all the administrative work behind running a fund, which is a lot more than say, doing a syndication where you've got one project, you're only trying to manage one project and the income from that and dispersing the income from that.

With a fund, you've got multiple projects. And maybe let's just back up again a little bit and explain for some of the people that are on this call, what we're talking about are blind pool funds where you're going to be raising some pool of money to be buying multiple projects. And so you've got to have a way to consolidate all of the earnings from those projects and to reconcile all of that so that you know what to withhold in reserves, what to disperse to your investors, and then making sure that they have all of the appropriate tax documents and supporting documentation to support those distributions. Is that a correct characterization, John?

John Ruszkowski:

Correct. Yeah. I'll break it down into a few different buckets of what we do as a fund administrator. I mean, first and foremost, probably what most folks know an administrator for is acting as the independent books and records. Most folks may not be equipped, may not have an internal accounting team, so you outsource that role to someone like Opus. We have no skin in the game, there's no conflict of interest, which is really nice. And again, going back to that independence factor, that's probably first and foremost why most folks would want to bring an administrator on, to give peace of mind to their investors just knowing that there's no potential shady activity or “cooking of the books” behind the scenes. We have no association with our clients. So from our standpoint, we can afford to be completely independent. But from a high level, we would act as the books and records.

Our main role is to strike what's referred to as the net asset value on typically a monthly or quarterly basis. We're also going to be — just to back up, the NAV is going to be a full set of financials that include the balance sheet for the fund, the income statements, the allocation schedule is going to be the partnership accounting, and then we'd also do a set of portfolio reports as well. So you'd be able to see all that information in kind of a single napsack. We also distribute investor statements out to LPs as well. So again, they're going to be getting that independent updated balance information, performance information, all that's going to be included as the deliverable to them. So that's really from a reporting standpoint what our clients and their investors are going to be getting. 

The second bucket I'll talk about is the investor services. We're typically the outsourced investor services team for our clients. We're going to be handling all the investor-level transactions that are occurring within the fund. So we'll think about the initial investor subscriptions. When those come in, we're going to be essentially processing the sub docs. We're going to be onboarding the investors and getting them set up in our system. We do the KYC and the AML checks as well. So KYC, just being “know your client” checks, making sure that there's no red flags in their background that could potentially disqualify them from being part of the fund. On the AML side, we're going to be confirming who's the beneficial owner of the incoming capital, confirming that it's coming from a regulated financial institution. Ongoing within the fund, we're also going to be helping with capital calls if those are applicable.

So if management are going to be periodically calling capital as different opportunities come up, we're going to be the team that's typically allocating that capital. We're going to be sending capital call schedules to our clients. They'll confirm the balances, and then from there we would create the capital call notices and distribute them to our investors. Similarly, with the distributions as well. So there's going to be distributions that are paid periodically. We're going to be handling the processing of those as well. Everything from soup to nuts, allocating the balances, pushing out the notices, and then also helping assist with the bank to push those transactions back out to investors. So that kind of covers the investor services side. 

Third bucket I'll talk about is just on the banking. We help with the banking activities with our clients as well. So daily cash reconciliations, we're going to make sure we account for all the activity with the fund.

And then we're also going to be helping with wire processing as well. So we have a unique control in place where Opus would act as a second reviewer and approver of all outgoing movement of money from the fund bank account. And again, this goes back to providing confidence and peace of mind to your investors. So any sort of outward movements of money from the fund bank accounts are going to go through our banking team and we're going to be essentially reviewing it and signing off on it, with asking for support or some sort of supporting documentation that gives credence to that wire. So basically it restricts any one of our clients from potentially taking investor capital and using it for unauthorized purposes. Knock on wood, we've never had anybody try that, so that's a good thing. But, again, it's one of those risk controls that we have in place to just make sure that everything is operating properly within the fund.

And then the last thing I'll mention is just the audit and tax support. At the end of the year, we're going to be preparing what are referred to as the year-end financials, and then we're going to hand those off to whoever the auditor is, if there is one. And then we provide any sort of audit support along the way. So these are just a few of the main responsibilities that we play. There's obviously more nuanced things in between, but at a high level, I think this covers most of where we typically fall in place from a responsibility standpoint.

Kim Lisa Taylor:

So if I'm a fund manager listening to this right now, I'm like, “You're hired!” Right?

John Ruszkowski:

I hope.

Kim Lisa Taylor:

Get that stuff. And it's like, “Oh, I had no idea I had to do all that stuff. Now that I know that that stuff can be done for me, I'm just going to hire them to do it.”

John Ruszkowski:

Let me just comment on that. I mean, look, it really is a partnership. Sometimes I get clients that think, “Okay, I hired a fund administrator, I could wipe my hands clean of all that stuff and they're going to do it.” It really is a partnership. I always say we're not a service provider, we're a service partner because we really become an extension of the internal teams of our clients. So we can't just blindly confirm stuff and approve stuff. We do need collaboration with our clients in order to provide a certain level of input information. We need certain sign-offs. So there is certainly collaboration between the teams on a day-to-day basis, but we're in a lot of instances preparing and acting as the final sign-off on stuff. So I wish I could say you just hire somebody and you sit and forget it or hire an administrator, but there is going to be a lot of ongoing communication back and forth.

Kim Lisa Taylor:

Well, and it's the same with our services. When somebody hires Syndication Attorneys to draft their offering documents, it's a very interactive process. And occasionally we have a client that's like, "Hey, I hired you. Why do I have to read these documents?" It's like, "Well, because your investors are going to be looking at them and they're going to ask you questions, and if you don't know the answers, they're not going to invest with you." And so we do require our clients to review and provide input, make sure their documents are 100% correct, just like you guys need input. You need to have the input from your clients to make sure that what you're doing is right or if you see something that you're questioning, they can confirm what it was for or what it was about. So that's important. And I think you also mentioned to me earlier when we were talking about this that you also pay vendors, right? If you have to pay somebody for something, you guys can do that?

John Ruszkowski:

Yeah, exactly. So typically our process — and sometimes it deviates from administrator to administrator — but from our standpoint, our clients will just provide the inputs within our client portal. So they'll go in and they'll make the initial request, they'll say basically who it's going to, what's the amount, what date they want the transaction booked as, and then they upload some sort of supporting documentation. So they do that within our portal. Obviously that's not the final end all, be all. They essentially prepared and then from there it goes to our banking team. We review and essentially approve it after we reconcile the support with the request. And then from there, we would actually go into the banking portal, whoever the bank is, and we would kind of set that all up. So we would be the ones that would be setting it up, but it would essentially be initiated by our clients within our client portal.

Kim Lisa Taylor:

Well, it's a tremendous amount of services, and I know you told me earlier in our previous conversations what your service rates were, which are really, really reasonable, and we'll get to that in a little bit. But so you have your digital subscription tool. Tell us about that. What is that?

John Ruszkowski:

Yeah, so one of the things that's quite unique about Opus is we are, I mean if you ask probably our founders, we're as much a technology company as we are an administrator. We operate under a proprietary technology model. Even when I say we're forward-looking on technology, it's not just like a buzzword. We actually put our money where our mouth is. So we have full-time teams that act in our IT and innovation. And also we have our full-time cybersecurity team in-house as well. So we don't outsource that. None of our technology, we're not white-labeling it, we're not purchasing it from a separate vendor. I think the obstacle with that is kind of beholden to what they tell you what you can and can't do. That's something that we never really wanted. We always wanted to be as flexible and as customizable as possible. So it is proprietary model.

All of our systems have been pretty much built and maintained over the course of the life of Opus. We have our client portal that I mentioned, that's going to be the portal that our clients have access to where we're communicating different levels of sensitive information and updated transaction activity. Again, we're speaking together between us and our clients. 

We have an investor portal as well, and that's going to be for obviously the LPs. Once they get onboarded, after they've subscribing to the fund, they're going to get access to that via username and password. That's where we're going to be uploading or distributing any sort of sensitive information to them. So new-investor statements, updated capital account balance information, K1s at the end of the year, stocks, capital call notices, distribution notices, those are all going to be upload there.

It's much safer and more secure than doing the old-fashioned email routes. So I bring that up because our digital subscription tool is a quite a unique tool that we rolled out about a little over a year ago. One of the things that we always heard from clients and we're constantly asking them, "Hey, what are we doing good? What aren't we doing good? What do you guys wish you had access to?" One of the things we kept hearing is, "Hey, is there a way to streamline the investor subscription process?" It's always been very bulky and paper-heavy. And honestly from our standpoint, probably about 50% of the subscription documents that we receive have to get kicked back out to our clients who then have to manage some remediation work because they were either filled out incorrectly or there was items that were left blank. It's a very confusing process.

So what we've done, we basically created a universal template, and it's not meant to replace what the lawyers are doing, right? You're always going to have your investors that feel more comfortable doing it the paper route, paper subscriptions. Especially institutional investors, they're typically going to do it the more traditional route. But for high net worth individuals, a lot of them have adapted our digital subscription tool as their de facto way of allowing their investors to subscribe. When we created it, we used smart technology within it, embedded within it. So what it does is it actually takes the answers that an incoming subscriber has input previously in the document and it understands, it takes that and it basically leads them down a certain path of questions that are only applicable to them. So there's less confusion like “Does this apply to me, does it not?”

And just as a very simple example, when it comes to the portion where you're asked, “Are you investing as an individual or are you investing as an entity such as a trust or an LLC?” Depending on what you check there, there's going to be certain questions that are applicable to whether an individual, or we'll call it like an LLC. Just based on that, once they click a certain button, the system understands, okay, this is an individual, so I'm only going to show them questions that are applied to an individual and exclude everything else. So what it does is, it gets rid of all the noise that would normally confuse or cause issues for an investor, and it keeps it very simplified and a very narrow path for them to complete the subscription. So it's been a real game-changer. Obviously some lawyers have a little bit of an issue.

They want to at least review kind of the language that we're presenting. Again, the secret or the not so secret thing about subscription documents are, they are pretty much general across most law firms. Some language could be customized or tweaked across firm to firm, but for the most part, there's the same general investment questionnaire. It's the same questions that are presented to investors. So based on that, in collaboration with some other lawyers, we felt comfortable that we weren't stepping on too many toes by implementing something like this. And what's nice about our tool is that because we're not licensing it or white-labeling it from a separate firm, there's no fees for us to pay to somebody else. So we've actually offered it as a basic part of our offering, so there's no extra fees if our clients decide to utilize it with their investors. It basically makes our life more easy and more efficient. And it does the same for investors and our clients. So we're happy to offer it as just a core part of our offering.

Kim Lisa Taylor:

Yeah. I'm all for anything that makes it easier for investors. I've invested in people's descriptions before I filled them out, and it can often be confusing. And I know that ours can be a little overwhelming for people at times because you do have to... If you're creating an attorney creating one, you've got to kind of cover all the possibilities. And it's like, “Okay, are you that?” And like you said, if you can start to carve people off— if you're accredited, answer these questions, or if you're not accredited, answer these questions — and making sure, I guess with your 506(c) offerings that people are actually providing the verification that they are required to provide to make sure that they are indeed accredited. Is that something that you guys would also review?

John Ruszkowski:

Yeah, exactly. And let me mention one other thing. So I mentioned that with the paper documents, typically the remediation rate was about 50% of subdocs. Once we implemented this digital subscription tool, it's pretty much taken that almost down to zero because everything has to be filled out correctly. With an electronic version, you can't just skim over something. There's certain required fields. And also another cool thing is that we require all of the KYC docs. Any documentation has to be attached to the template when they're filling it out. So you're not getting a paper subscription document without any driver's license or passport or other required documents. You're not getting one, and then the other stuff is being excluded where you have to go chase for it. We're getting everything all at once from the incoming investors. So again, that's helped to basically remove the need to go out and chase investors for stuff.

But to your point about the accreditation verification, we do have included a section within the digital subscription template where if it's a 506(c) or some other structure that requires investor accreditation verification, we can certainly enable that. So that's going to be a question that would be presented when it's a 506(c) structure. And so the investor would go through, they would attach certain documents, so something along the lines of — and we lay it out pretty clearly what's acceptable — bank account docs, tax docs or what most folks choose to upload has actually coincidentally been an attestation letter. I guess less eyes on their personal information is better. So we do accept if there's a wealth advisor or some sort of tax individual who can attest to the fact that they're an accredited investor, we would accept that as proof of that attestation, so we can certainly handle that requirement as well.

Kim Lisa Taylor:

Excellent. And then about, do you guys do any kind of background checks on the people that are administering or the fund managers?

John Ruszkowski:

Sure. Yeah. So just as part of our onboarding process, just like we're going to be doing KYC checks on the incoming investors, we also want to know that ... Just like our clients are vetting us against other administrators, we want to make sure that we know who our clients are as well. So we would do KYC checks and background checks on the principals and partners of the funds that we're going to be partnering with.

Kim Lisa Taylor:

Yeah. And we do those also, and I don't know how many other law firms do, but we just make it a requirement for all of our clients that want to bring in other people into their management team, that they all have to undergo that. And we feel like it's a service to our actual clients because you don't necessarily know the other people that are coming into your deal. You might've met them at a conference and they're going to help administer your syndicate or your fund and maybe bring some investors and do some other jobs, but you don't necessarily know their background.

And so if we impose that requirement on all of our incoming clients and all the other people in their management team, it causes people who aren't qualified or who maybe have some of those negative things in their background to say, “Yeah, never mind. I'm not going to do it.” And then that helps protect the other people in management. So I think that's really a basic requirement, and for us it's a necessary component of being a part of a funder, a syndicate management team. So do you guys have any clients, do you know that are doing just syndicates and using your services or all the people that come to you typically doing a larger fund where they're going to be buying multiple properties?

John Ruszkowski:

Yeah, it's an interesting question. We have been asked that before. I'm actually in the process of working through that right now where there's no commingled investor funds. They're still at a phase where they're trying to build a track record so they can go out and raise a fund at some point, but it's a small team and they're like, “Look, we don't have the bandwidth to be handling of all these middle and back office stuff.” So we're working on it. I think we would certainly consider it as long as ... Again, it ultimately comes down to fees. As long as they're willing to shoulder some fees, the fees that ... Again, ultimately we can't work for free. Unfortunately, in order to keep qualified and really valuable personnel, we got to make sure that we can keep the lights on and keep our best human capital in place. But the long short, we would certainly consider it. We would certainly consider that. Yeah.

Kim Lisa Taylor:

Why are the net asset value evaluations important?

John Ruszkowski:

Yeah, so the net asset values really, I mean, that's going to be an indication of the growth of the fund, the size of the fund. It's also where investors’ P&L allocations are going to be derived from. So the net asset value is basically a combination of the P&L from the fund, and then also we take into account any sort of expenses that were incurred by the fund as well. So for those that aren't familiar, it's usually written up in the PPM, what fund expenses can be expensed back to investors, and those are typically things like legal fees, administration fees, some tax and audit work.

It's basically a roll-up of all the P&L that's being derived from the funds. After our portfolio accounting team does their work, our fund accounting team will look at the bank statements, say, “Okay, here's different fees that we need to pull out of the final balance number,” and then from there, we're going to allocate the P&L across investors. So they would get their statements that are essentially going to show their net returns for that period. There is a difference between the gross and the net. The gross performance is going to be the performance before fees, and then the net's going to be everything like net of fees. So it's important because again, it's going to show the management company essentially how their fund is performing, how much it's grown from past periods. Yeah.

Kim Lisa Taylor:

And do you actually... look down at the asset level to see what the value of these different assets are that the fund owns?

John Ruszkowski:

Yeah, so we do. So all of our clients receive a set of portfolio reports. So it's going to just give updates on what the cost base is, what is the current market value of assets, any sort of realized or unrealized gains … that's going to all be included in that report. I will note we're not a valuation firm, so when there's level-two or level-three assets that aren't publicly able to be priced, we are typically working with either the manager or a separate third-party like an appraisal firm or a valuation firm to get some sort of guidance on that. For smaller funds, maybe you can't afford to go out and hire a third party. It does get expensive, but in those instances, the manager, we ask all of our clients to have some sort of pricing policy or pricing methodology in place. So in those instances, we would ask the manager to maybe provide some guidance.

And again, maybe it's based on comparative properties or some sort of internal methodology, but we're not just checking the box. You can't give us a pencil and say, “This pencil is worth a million bucks.” And we're like, “Okay.” No, we're going to take a look at your pricing methodology and say, “Okay, they're determining that the markups are markdowns on this asset is X, and we're going to look to back at the price and set policy and make sure that that kind of fits the bill there.” Now I will also mention that the teams that they would be working with here at Opus, aside from the technology that I mentioned earlier, we kind of have a two-pronged approach. We have the technology and we also have human capital here that our clients would be working with. So every client's going to be allocated a small dedicated team, which really is going to consist of a day-to-day point person in the form of a client relationship manager.

And then we're also going to have a dedicated accounting team as well. So when these conversations come up around evaluation and stuff like that, where we're getting to the end of the quarter, we want to know, okay, for accounting purposes, is there anything that needs to be updated from a valuation standpoint? We're going to have direct teams that that'll be reaching out and working with our clients on this. So I don't want everyone to think that it's simply a relationship that's managed over a computer. No, you would have actual dedicated team members that are all locally based here who would be working with you on a regular basis as well.

Kim Lisa Taylor:

So I'm sure you guys are familiar with the Corporate Transparency Act that's coming into effect Jan. 1, 2024. Is that a service that you guys are going to be able to help provide … to provide those reports to Financial Crimes Enforcement Network, that are going to be required under that?

John Ruszkowski:

I want to say that the custodian is going to be most involved in that, if I recall. I’ve got to check with my team. I don't know where we are with that, but from what I understand, I think when we first discussed it, I thought that it was going to be more of a custodian that was going to have to be in place for not just publicly listed securities, but also for some of these closed-end-date like illiquid asset funds as well. I'm not quite sure on that. That's something that I'd probably have to take back to my team and double check.

Kim Lisa Taylor:

Okay, we've all got to be aware of it. It's coming and it's going to require... There's some articles about that on our website. Also, if you guys don't have my book, “How to Raise Capital for Real Estate Legally,”
  it's available on Amazon, or you can get a copy of it on our website. But either way, you want to make sure that you read that chapter on the Corporate Transparency Act because it's going to apply to every single entity that you own and all people in management, plus anybody that has over 25% of the ownership interest in any entity that you have are going to have to be reported. And that's for existing entities as well as new entities.

For existing entities, you have a year to report, and for new entities you have to report within 30 days. And that's going to become a challenge for some of our syndication clients because they may form their entity and not close on the deal for 90 days. And so in that time span, they've got a couple of 30-day periods that they're going to have to continue to update FinCEN. So it's going to be a little bit of a challenge. We've got to be careful about when people are admitting members and things like that. But that's a topic for another day, and we actually did a podcast about that before. If you're interested, you can listen to that or you can read the chapter in my book about it. Okay. Well, let's see. So one other question I had for you ... Let's see. I think we kind of talked about this during your last response was, what is the difference between an investor management platform and a fund administrator?

John Ruszkowski:

Maybe that's a little bit of broad term, but to me, I mean there are firms out there that really just handle kind of the investor experience side of things. Investor management I think would be more handling ... just having an investor portal where investors can log in and pull that information. I mean, we certainly have that. I mean, you could probably look at us as a combination of an investor management platform plus an administrator or fund management platform. So the difference being that I think we know firms that are doing just the investor management platforms, they really only handle the investor side of things.

There's obviously no administration in place. You're basically giving your investors a place to log into. And again, some of them have digital subscription options, they handle distribution … and then also give investors kind of a cool user experience to be able to pull account balances and maybe see what assets are being held in the portfolio. We can handle most of those things as well in our portal. But the main difference is being that we're going to be also the ones that are working directly with the management company and handling the administration of the fund assets.

Kim Lisa Taylor:

And I do think that is the primary distinction is that you've talked about all these different things in the beginning of this call of what you guys are going to provide, and you're not going to get all of that out of just an investor management platform because you don't have that human capital component. You don't have a person assigned to you that's helping to upload this information you're feeding. Instead, you are the fund administrator, you are the one that's putting the information into the portal and you're having to figure all that stuff out for yourself.

John Ruszkowski:

Yeah, so what's interesting is they need... I mean fortunately if it's a fund, I mean they can be in place as the investor management platform, but they also then need to have a fund administrator in place. So they kind of need us in collaboration with what they're doing. I mean, it's not really the case vice versa. I mean, we can handle both sides of it. So yeah, I would say we can kind of cover everything from soup to nuts on the administration side.

Kim Lisa Taylor:

Well, and I know that someone's going to ask this question, so I'm going to ask it for you, and I think I already know the answer is that if somebody were to hire you as their fund administrator, you would want them to use your technology platform. You're not going to act as a fund administrator for somebody else's investor management platform, are you?

John Ruszkowski:

No, no, we wouldn't. I mean, a lot of overlap between what we personally do as kind of a fully integrated solution versus it's a little bit more of a niche that somebody on the investor management side would have. So yeah, I mean there's overlap, but I think it becomes a bit confusing if you have us and them in place. And we get this question all the time because folks will have certain usual suspects who we probably won't name, who have them in place, and they say, "But I need a fund administrator as well. Can you guys manage our investor management platform?" And the answer is no. I mean, because we have all the tools that they offer, and it makes it a lot more efficient just to have it under one roof, if you will.

When we're producing different documents like investor statements or capital call notices, distribution notices, we're not going to log into another competitor's portal and maintain and manage that, just doesn't make sense. So if somebody is emphatic about having their current provider and then also having Opus, we would then funnel any information through the manager who would then have to figure out how to map it to the investor management platform, the separate investor management platform. So kind of takes the whole benefit of having a fully integrated fund administrator … kind of removes that because it then becomes a manual effort from our client's standpoint to keep both us and the other portal updated so, certainly not something that I would recommend.

Kim Lisa Taylor:

Yeah. And I completely concur with you because we feel the same way about reviewing other people's documents. It's like we know what's in our documents; our documents continually evolve. They have continuously evolved over all the years that I've been working in the syndication space. And for us to try to figure out whether somebody else's docs have the provisions that we've inserted into our documents for specific protections for investors and for our clients based on the real experiences that our clients have had, it takes longer. So the answer when somebody asks us to do that is usually, "Yeah, sure, we can do that, but it's going to cost more than just having us draft your docs."

John Ruszkowski:

Exactly. And ultimately you want to keep things as kind of neat and tidy and efficient as possible. So it seems like it's a little bit counterintuitive from my standpoint to basically have two different systems that you're working off of. It's much easier to have just one single system and have all the systems speaking to one another.

Kim Lisa Taylor:

And I completely agree with you, once you either decide you want the full service and you're going to embrace that, or you decide you want to do it yourself, and then you are the fund administrator, that's typically what happens. So if you've got a lot of deals flow and you've got a lot of investors to talk to and you don't want to spend a bunch of times in an office uploading your stuff, then a fund administrator is the way to go and just let them handle all of it. Because even if you have an investor management platform, there's certainly a place for them in the market and for syndicators that are doing one-off deals, maybe that's their best solution, but you've still got to have somebody dedicated to uploading information on a regular basis and maintaining that information and figuring it out. So you almost have to hire somebody that that's their job.

John Ruszkowski:

That's when I come up against it the most is that people, when they get into this business, they have this management system in place for these deal-to-deal syndicate deals, and it is great for that, don't get me wrong, but then when it comes time to launch a fund, they're still kind of beholden to that system. They're like, “Well, we want a fund administrator, but we also want to keep using the system because this is what our investors are familiar with and blah, blah, blah.” And it sometimes becomes a tough sell. I get it from their standpoint, but sometimes you just got to adopt as you're looking to kind of scale up the business.

Kim Lisa Taylor:

Absolutely. Yeah. It is kind of like doing your own oil change and taking your car to have your oil changes done. At some point you decide that your time is better spent doing other things and hire experts to do the work that they're really good at. And if you review the list of all the different services that you provide, that's a tremendous amount of services that you get from using a fund administrator that you're not going to get just trying to do it on your own. When you're trying to scale up and do a fund, you kind of have to just pull up your pants and go, “Okay, we're going to do this. We're going to do it all the way. We're going to hire the right people to handle it for us, and that's going to help us scale up better. We're not going to waste a lot of time trying to figure it out, and our investors are going to really appreciate it, and they're going to understand that we need business.”

John Ruszkowski:

Look, Kim, I was going to say you know as well as I do, not everybody's equipped to handle all these things that I mentioned that we do as an administrator. I think what I find most often is most managers, they're good at a few things and you should stay in your lane from a skillset standpoint. Most folks are great at managing a portfolio, vetting new opportunities and really raising capital from their circle of investors. Everything else in between, you can't make believe that you're good at accounting or doing KYC checks or audit support and stuff like that.

So what I always tell folks is like, "Look, focus on what you do best and then outsource the rest to somebody." This is our specialty skillset. I mean, this is what we do for hundreds upon hundreds upon hundreds of clients, and ultimately it turns out to be a good decision from their standpoint. I mean, even if you decide to hire somebody full time to do administration internally, you're going to have to pay them at a minimum six-figure salary. I mean, we can do it for a fraction of that while also maintaining that independence factor that we talked about earlier. So, no-brainer.

Kim Lisa Taylor:

Yeah. All right. So are you comfortable talking about costs, for typical costs that somebody could anticipate if they're going to hire you guys, or is it going to be case-by-case or based on the amount of money they're raising? How do your fee structures work?

John Ruszkowski:

Yeah, I mean certainly we price each engagement individually, but I mean, just from a general standpoint, I'm happy to just throw some pricing out there. I mean, we do our pricing structures based on a flat fee, but based on the size of the funds. So as an example, we would bucket out in our proposals, various AUM tiers, we'll stay initial ones zero to $25 million, thereafter $25 (million) to … we could do $50 or $75 (million), we can get creative. Basically, the idea is that to give transparency to our clients to know, to be able to anticipate what their administration fees are going to be on a period-to-period basis, you don't want to be getting variable invoices every period and wondering, “Well, why is it higher or lower from last period and this and that.” So we do the flat fees. It also gives nice runways for managers to be able to scale up their business without automatically again being hit over the head with new fees. So I think it's a win-win, especially since most of our clients are of the nature of new launches, obviously costs are going to be top of mind. Budget is obviously a big thing to take into consideration. For that zero to $25 million tier, we're typically starting at about $1,500 per month for that. 

Kim Lisa Taylor:

That is incredibly reasonable when you compare that to an investor management platform that you have to manage everything versus what you guys are charging. It's a small difference and you end up getting so much more with a fund administrator. Hey everybody, audience, if you're going to do a fund, do it right. You got a lot of jobs to do with your fund, the biggest of which is marketing your fund and getting people to invest with you. It's going to consume a lot, lot of your time, and you're also going to have to be finding assets and doing all the due diligence and everything that's involved with that.

So make your life simpler. If you're going to do a fund, just hire a fund administrator just to keep everything straight so you don't go crazy. That's just kind of my thoughts on it. Based on this call with you, John, I'm blown away by the amount of stuff that you guys do, and I really think it could be a tremendous benefit for people that are kind of going from syndication into a fund. They're uncertain how to administer a fund and this seems like a pretty no-brainer solution.

John Ruszkowski:

Yeah, it is. Even after seven years, I'm still blown away that we still offer all that. I mean, between the... I've mentioned the technology side of things. I mean, just even the digital subscription option.  If you were to try and white-label something from another technology provider, that alone could be probably $20,000-$25,000 a year. So I mean, with our solution, you're getting kind of the technology all rolled in. You get the hands-on approach from the teams that would be working directly with you, and you get a good institutional administrator name and you can go out to your investors and say, "Hey, look, we're serious about what we're doing. We're taking the time to put the right infrastructure in place. We have all of our I's dotted, our T's crossed."

So it's a no-brainer. I mean, and look, I will say with that $1,500, there are certain potential cost drivers depending on the volume of capital calls and distributions. That's something that would be kind of separate from the base fee. But again, that's all on a case-by-case basis. There's a difference in engagement where there's five investors and then there's 50 investors or 500 investors. So we have to take that into account. But I would say for, again, a small early stage manager under $25 million, maybe doing a proof of concept fund or maybe first institutional fund, you'd probably be looking at somewhere between $20,000 and $30,000 per year, all in.

Kim Lisa Taylor:

Well, that's fantastic. Well, before we give out your contact information, I just want everybody to know if you have a question for me or for John, we've got a couple of them, or somebody's raised their hand. We've got a few that have typed into the Q&A. You can do that now. John, how can people reach you if they want to know more or they want to engage you?

John Ruszkowski:

So you can reach out to me directly. I help lead the business development effort here at Opus, so any sort of inquiries are going to be funneled through myself anyways, so you can reach me, it'd be my first initial and then last name @opusfundsservices.com. And that's J as in John, R as in Robert, U, S as in Sam, Z as in Zebra, K-O-W-S-K-I,@opusfundservices.com. And you can tell that I have experience spelling my name phonetically because I've had to do it my entire life.

Kim Lisa Taylor:

Right, right, right. Okay. I just put that in the chat.

John Ruszkowski:

And check out the Opus website as well. There's some good information over there. We have a digital library that folks can access and you can see kind of small highlight videos from some of our technology capabilities as well. So it's a lot of nice resources there.

Kim Lisa Taylor:

Excellent. All right, let's get to Q&A. So Tariq, you had a question for us. Can you unmute yourself? Hi, Tariq.

Tariq:

Yes. Hi. I just tend to see if this ground-up multifamily project, they do the funding for real estate, is that something that John and his group look at? 

Kim Lisa Taylor:

They don't do the funding for you. You have to go out and raise your own money. They manage, right? Is that your question?

Tariq:

Yeah, yeah. Do they administer the funding after we raise the money?

Kim Lisa Taylor:

Yes, they can. He said they're looking into doing single-project fund administration, so you might want to just have a conversation with him about that and see what they could offer if you're doing it for a single development project. What I think their forte is helping people with funds like blind pool funds that are buying multiple projects. 

John Ruszkowski:

Kim, we can do single-asset SVPs as well. I mean, I've actually proposed on a few recently where there's one opportunity, one project, so it's just going to be a single asset, maybe a handful of investors. It's pretty simple to do. And we would probably propose on a fee that's even less than that $1,500 being that it's a little bit scaled down from a full commingled fund. So yeah, absolutely, we take a look at that.

Kim Lisa Taylor:

Excellent. Okay, we've got a couple of other questions.

Tariq:

Thank you.

Kim Lisa Taylor:

Yep. I think we've answered your other questions, Tariq. If nobody else has any questions, we'll go ahead and wrap up. John, it's been a pleasure. I've learned a ton. I love to do these podcasts. This is how I started doing podcasts because I wanted to learn about all these other services that were available, and I realized it was something that was of value to our listeners and our potential clients and current clients to understand all these different services available to them as they scale their syndication and fund businesses. So we're happy to know you and happy to be able to refer people to you. And is there anything else that you'd want to say that you think we didn't cover?

John Ruszkowski:

I think this was great. I mean, thanks again. I think the fact that you offer this out to your clientele and even just individuals, I think it's fantastic because look, there's a lot of education that has to be had out there. And I actually spend a lot of time on my calls not only being the fund administrator, but also just kind of advising folks on best practices. So I think what you're doing here is fantastic. So appreciate you and thanks so much for having me on here, and I look forward to continue to support yourself and your clients as opportunities come around.

Kim Lisa Taylor:

Very good. All right, well thank you, everybody, for joining us today and reach out to John if you have any questions about fund administration or maybe even single project administration, we are happy to know him and happy to be able to refer people to him because it seems like they are the specialists in this field and we can all benefit from learning to hire the right specialists to do the right jobs. All right, thank you, everyone. If you want to know more about us or schedule a call with us, please go to syndicationattorneys.com. Please visit our free resources library where you can get a free book, you can read all of our articles, review our frequently asked questions.

Also, don't forget about our podcast, “Raise Private Money Legally.” It's available on 20 different podcast platforms. And if you don't have this new book and you would like us to mail you a free copy, you can text the word SYNDICATE to our phone number, which is (844) 796-3428. So text the word SYNDICATE to (844) 796-3428, we'd be happy to mail you a physical copy of our latest book, “How to Raise Capital for Real Estate Legally.” It's gotten a lot of good reviews. This one's a little thicker than the first book. Some of you that read the first book, this is a little heavier reading, but it's a lot more in depth. All right, we'll see you guys all next time. John, thanks so much. Everybody, have a great day.

John Ruszkowski:

Thanks so much.