New Administrator for Fund II: Should Fund I Move Too?

No. When you move Fund II to a new administrator, Fund I does not have to follow, and running the two funds with different providers for a while is a legitimate arrangement. But it should be a decision, not a default. The right answer depends mostly on how much life Fund I has left. A fund that is still calling capital and making follow-ons usually belongs with Fund II, moved at a clean point such as the start of a fiscal year once the prior audit is signed. A fund in harvest mode, with a quiet portfolio and few transactions, can often stay where it is until it winds down. Either way, the cost of a split shows up in the same four places: your LPs' experience, cross-fund holdings, valuation consistency, and your own time.

Why the question comes up at Fund II

Fund II is a new legal entity. It has its own LPA, its own bank account, its own LP base and its own books from the first capital call. That makes the launch a natural moment to choose a different administrator, because there is nothing to migrate. The new provider simply sets the fund up from first close.

Fund I is a different story. It has years of capital account history, a portfolio carried at values someone has to defend in the audit, and LPs who are used to a particular statement. Moving it involves a handover, and the general mechanics of that are covered in our guide on How to Migrate Your Fund Administrator. This post is about the narrower question that comes first: should Fund I move at all, and if so, when?

The easy answer is to leave Fund I alone for now and deal with it later. That is sometimes right. The problem is that "later" tends to have no date attached, and a fund in the middle of a raise never has a quiet quarter. So it is worth looking at the three real options side by side.

Option 1: Split the funds and leave Fund I where it is

Fund II starts with the new administrator. Fund I stays with its current provider for the rest of its life.

This works well when Fund I is past its investment period, has few transactions left, and the current provider is doing an adequate job. If the remaining activity is a handful of valuation updates a year and the occasional distribution, the value of moving may simply be smaller than the effort.

What it costs you is two relationships, two statement formats and two sets of deadlines for the next several years. For a fund with five or more years of life ahead of it, that is a long time to run two back offices.

Option 2: Move both funds at the Fund II launch

Both funds sit with one provider from the start of Fund II. LPs see one format, one portal and one set of definitions.

The drawback is timing. It concentrates two pieces of operational work, the Fund II setup and the Fund I handover, into the period when you are closing LPs and have the least attention to spare. It also usually means a mid-year cutover for Fund I, so the new provider picks up opening balances partway through a year that the auditor will later test from both sides of the changeover date.

It is entirely doable. It is just not the gentlest sequence.

Option 3: Launch Fund II now, move Fund I at the next clean point

For most returning managers this is the practical middle. Fund II starts with the new administrator from first close. Fund I moves effective the first day of the next fiscal year, after the prior year's audit has been signed off.

The appeal is that the line is clean. The old provider closes the year it kept the books for and supports the audit of that year. The new provider takes over from audited closing balances, along with each partner's capital account history from inception, broken into contributions, distributions, fees and allocated gains and losses. Nothing is restated mid-year, and the auditor has one handover point to test rather than a moving one.

The cost is a few quarters of running two providers, which is short and known in advance.

Where a split actually costs you

Whichever option you choose, a period with two providers has specific costs. They are ordinary and manageable, but they are worth naming so you can plan for them.

• LPs who are in both funds. Many Fund II LPs are Fund I LPs who re-upped. They will receive two statements in two formats, possibly through two portals, and may find figures defined slightly differently. One may show net IRR since inception and the other may not. Our guide to LP Reporting Standards for Emerging VC Funds sets out what a consistent quarterly and annual package should contain, and it is worth asking both providers to report to that same standard.
• Companies held by both funds. If Fund II follows on in a Fund I company, two vehicles you manage now hold the same company. With two providers, the same position can end up carried at different values at the same quarter end. An LP in both funds will notice. The fix is one written valuation policy that both sets of books apply identically, and a shared register of cross-holdings.
• The GP and the management company. Management fees and any carry now come from two funds whose books are kept in two places. Reconciling what the management company is owed takes a little more work each quarter.
• The auditor. If the same firm audits both funds, it is working from two sets of records and sending two sets of requests. That is normal, but it adds coordination on your side.
• Your time. Two contacts, two calendars, two places to look when an LP asks a question.

Five questions that usually settle it

• How many years of capital activity does Fund I have left, counting capital calls, follow-on investments and fee periods?
• What share of Fund II's LPs are also Fund I LPs?
• Will Fund II invest in any Fund I portfolio companies?
• When does Fund I's next audit sign off, and could a move start the day after the year it covers?
• Can your current provider hand over per-partner capital account history from inception, in a form someone else can load and test?

If the first three answers are "several years", "a lot" and "yes", Fund I probably belongs with Fund II, and the real question is when rather than whether. If Fund I is quiet, has a different LP base and does not overlap with Fund II's portfolio, leaving it where it is can be the right call.

The last question matters whichever way you go. If the honest answer is no, that is useful to know now, while you still have time to get the history into shape, rather than on the day you finally decide to move.

What "later" should mean

If you choose option 3, put a date on it. Pick the fiscal year end the move will follow, write it into your Fund II operating plan, and tell the new provider now so the handover list is requested early rather than discovered in the final month.

The one step that genuinely needs care is the tie-out on the changeover date: each partner's closing balance with the old provider has to equal their opening balance with the new one, and someone has to sign that off. It is a reconciliation, not a leap of faith, and doing it from audited year-end figures makes it about as clean as it gets.

Without a date, "we will move Fund I later" has a habit of becoming "we will run two back offices until Fund I winds down", which is a decision too, just one nobody actually made.

What it costs

Abax charges a flat $5,000 per fund per year. Two funds are