Navigating change: How co-sourcing is reshaping fund administration

In this article, Greg McKenzie and Alice Heald explore why co-sourcing is on the rise across leading fund jurisdictions, the key benefits for managers, and how different regulatory environments—such as the UK, Channel Islands, and Luxembourg—are helping shape this strategic shift.

Why co-sourcing is redefining fund operating models

Co-sourcing enables fund managers to retain control of critical functions—such as investor relations or oversight of NAV calculations—while leveraging external expertise for areas like data management, reporting, and regulatory compliance. This hybrid model offers a tailored operational structure, balancing autonomy and scalability without the rigidity of full outsourcing.

Importantly, co-sourcing is not a one-size-fits-all solution. It often suits mid to large-sized managers who already have in-house infrastructure—such as portfolio systems, experienced teams, or cross-border operational frameworks—that they want to maintain control over. These firms typically seek targeted support to supplement existing operations without relinquishing strategic oversight.

In contrast, smaller or emerging managers—who may lack built-out internal platforms—often benefit more from a fully outsourced model, at least in their early growth phases. The appeal of co-sourcing lies in its ability to adapt to a manager’s specific needs, making it a strategic choice for firms seeking a bespoke approach to operational excellence.

According to Allvue Systems’ 2024 whitepaper[1], “Co-Sourcing for Growth and Control,” 84% of surveyed private capital firms said they are planning to reevaluate their fund administration model in the next 12–18 months—driven by a desire for greater efficiency, control, and responsiveness.

Key benefits of co-sourcing

• Enhanced control and strategic oversight
  Co-sourcing enables fund managers to safeguard critical functions, ensuring that strategic decisions remain aligned with the firm’s broader objectives. Firms can oversee sensitive processes directly while relying on specialised partners to manage niche tasks. This approach also supports data integrity and ownership. By maintaining core systems in-house, managers can preserve a single source of truth, improve reporting accuracy, and reduce duplication. It enhances transparency, ensures consistent data flows across teams, and supports more informed decision-making.

• Operational flexibility and efficiency
  By outsourcing only specific tasks, fund administrators are afforded greater flexibility in resource allocation. This model enables firms to optimise costs by reducing the need for extensive internal infrastructure and instead tapping into the specialised expertise available externally. It also streamlines internal bandwidth. Teams can remain focused on value-driving activities while delegating time-intensive operational workflows—ensuring the business scales without introducing bottlenecks.

• Risk mitigation and data security
  Maintaining in-house oversight over strategic areas while outsourcing other elements enables firms to mitigate risks effectively. Co-sourcing reduces the exposure associated with full outsourcing—especially important in areas like data security and regulatory compliance—by keeping sensitive operations internal. This model also enhances regulatory responsiveness. With a clear division of responsibility and direct access to data and process flows, firms can respond to audits, investor queries, or compliance obligations swiftly—an important capability in a jurisdiction like Luxembourg.

• Access to expertise
  In the rapidly evolving financial sector, expertise in areas such as technology integration, regulatory compliance, and risk management is crucial. Through co-sourcing, fund managers gain access to advanced skills and technologies without having to invest heavily in developing these capabilities internally. As highlighted in the Allvue whitepaper, this model provides a direct route to innovation and operational excellence, ensuring that firms remain competitive even in challenging market conditions[2]. This accelerates adoption of new technologies and best practices. It also allows firms to tap into market knowledge and innovation without losing the strategic context of their internal teams.

• Scalability and adaptability
  The co-sourcing arrangement is inherently scalable. It allows firms to adjust the scope of services based on changes in market conditions, business strategy, or internal resource availability. This flexibility is particularly valuable for fund managers operating across multiple jurisdictions, where differing regulatory expectations and operational requirements call for a responsive and tailored approach.

Evolving fund centres and the rise of co-sourcing

Leading fund jurisdictions such as Luxembourg, the Channel Islands, and the UK are seeing continued growth in alternative asset strategies—including private equity, real estate, and private debt. This expansion brings increased operational complexity and is prompting managers to reassess how they structure their operational models.

In Luxembourg, for instance, ALFI data[3] shows that as of February 2025, net assets under management across all regulated funds and AIFs stood at EUR 7,337 billion – highlighting the scale and maturity of its alternative fund ecosystem. The Luxembourg Private Equity & Venture Capital Association (LPEA) has also emphasised the role of strategic partnerships in supporting more efficient and scalable fund operations[4].

Similarly, the Channel Islands continue to serve as a preferred domicile for private capital structures, with Jersey and Guernsey both offering substance-led regimes and strong regulatory reputations. Jersey has developed a well-respected and forward-thinking funds sector with an industry net asset value of £452 billion (as at March 2024)[5] and Guernsey’s thriving funds industry net asset value at the end of December 2024 stood at £290.1 billion[6]. Many managers in these jurisdictions are exploring co-sourcing to retain control over local oversight functions while gaining access to specialist support across reporting, compliance, and investor servicing.

In the UK, a deep base of asset managers and institutional investors—particularly in London—has driven demand for hybrid solutions that balance internal infrastructure with external expertise. This trend is especially relevant for firms managing multi-jurisdictional portfolios or operating under FCA regulation, where operational flexibility and robust data governance are critical.

Across these centres, co-sourcing is emerging as a practical and strategic way to scale operations, enhance governance, and adapt to evolving regulatory and investor expectations.

A strategic shift that’s here to stay?

As fund operations become more complex and investor demands continue to rise, co-sourcing is emerging as a key consideration for many fund managers.This hybrid approach offers managers greater flexibility, improved cost efficiency, and enhanced control over risk—while allowing them to retain oversight of core strategic functions.

Rather than being a passing trend, co-sourcing represents a long-term shift in how fund managers build resilient and scalable operational frameworks. By combining internal expertise with targeted external support, firms across jurisdictions are better positioned to meet the operational demands of modern fund structures—adapting to change while maintaining control.

How we help

At Belasko, we understand the operational and regulatory complexities that fund managers face and we’re working with clients to design and implement co-sourcing models that strike the right balance between internal control and external efficiency.

By combining our deep technical expertise with modern infrastructure, we enable clients to retain strategic oversight while benefiting from tailored support that drives scalability, resilience, and transparency.

We help clients navigate evolving regulatory landscapes, streamline operational processes, and integrate technology effectively—ensuring they remain agile and competitive in a rapidly changing environment.

If you’d like to speak to our team about building a co-sourcing solution tailored to your fund structure and jurisdiction, please get in touch with Greg McKenzie at: [email protected] or Alice Head at: [email protected].

[1] Allvue Co-Sourcing Whitepaper (2024)

[2] Allvue Co-Sourcing Whitepaper (2024)

[3] https://www.alfi.lu/en-gb/pages/industry-statistics/luxembourg

[4] How Co-Sourcing Partnerships are Enhancing Private Capital Funds Operations – LPEA

[5] https://www.jerseyfinance.je/jersey-the-finance-centre/sectors/funds/

[6] https://www.gfsc.gg/industry-sectors/investment/statistics