--- title: 5 Key Benefits of Outsourcing Shadow Accounting description: Discover the top 5 benefits of outsourcing shadow accounting for hedge funds, including cost reduction and risk mitigation, in our latest STP Perspectives blog post. image: https://blog.stpis.com/hubfs/Five%20Key%20Benefits%20of%20Outsourcing%20Shadow%20Accounting.jpg --- [![STP\_header\_logo](https://blog.stpis.com/hs-fs/hubfs/STP%20Growth%20Child/STP_header_logo.png?width=75&height=94&name=STP_header_logo.png "STP_header_logo")](http://stpis.com) - [FAQs](https://stpis.com/faqs-fund-administration-compliance-managed-services/) - [About](https://stpis.com/about/) - [About STP](https://stpis.com/about/) - [History](https://stpis.com/history/) - [Team](https://stpis.com/people/) - [STP Careers](https://stpis.com/careers/) - [STP Culture](https://stpis.com/careers/culture/) - [Benefits](https://stpis.com/careers/benefits/) - [Diversite, Equity, Inclusion & Belonging (DEIB)](https://stpis.com/careers/deib/) - [Hiring Process](https://stpis.com/careers/hiring-process/) [Portal Login](https://portal.stpis.com/) [Connect With Us](https://stpis.com/connect-with-us/) - [Who We Serve](https://stpis.com/who-we-serve/) - [Institutional Managers Investment operations services and innovative software for the front, middle, and back office.](https://stpis.com/who-we-serve/institutional-managers/) - [Wealth Managers Custom and turnkey asset management programs to grow assets and support clients.](https://stpis.com/who-we-serve/wealth-managers/) - [Emerging Managers Best-in-class full service solution to springboard your startup to the next level.](https://stpis.com/who-we-serve/emerging-managers/) - [Private Fund Advisors Comprehensive suite of fund administration, compliance, account and investor reporting services](https://stpis.com/who-we-serve/private-fund-advisors/) - [What We Do](https://stpis.com/services/) - [Investment Operations Outsourcing End-to-end investment operations and trading services.](https://stpis.com/services/investment-operations-outsourcing/) - [Fund Services Complete suite of services that deliver best-in-class fund administration.](https://stpis.com/services/fund-administration-services/) - [Compliance Services Get oversight that keeps you compliant and ready for changing regulatory requirements.](https://stpis.com/services/compliance/) - [Managed Services Designed to reduce operational burden, streamline workflows, and help you scale without adding headcount.](https://stpis.com/services/managed-services/) - [Trade Settlements Streamline processes, increase efficiency, and mitigate risk with post-trade settlement services.](https://stpis.com/services/trade-settlements/) - [Reconciliation Services Automate reconciliation tasks and strengthen oversight with reconciliation dashboards.](https://stpis.com/services/reconciliation/) - [BluePrint](https://stpis.com/blueprint/) - [Why STP](https://stpis.com/why-stp/) - [STP Knowledge Hub](https://stpis.com/stp-knowledge-hub/) - [Perspectives Fresh, original STP content written by members of our team, covering a broad range of topics.](https://blog.stpis.com/blog) - [STP in the News Our take on industry articles and topics written by our colleagues across the financial services space.](https://stpis.com/stp-knowledge-hub/in-the-news/) - [Case Studies Explore real-world success stories that highlight how we've helped clients overcome challenges, drive growth, and achieve their goals.](https://stpis.com/stp-knowledge-hub/case-studies/) - [Strategic Insights Stay ahead of regulatory changes, operational challenges, and industry shifts. Download our strategic insights to equip your firm with expert guidance on compliance, operations, and growth strategies.](https://stpis.com/stp-knowledge-hub/strategic-insights/) Nov 2024 # 5 Key Benefits of Outsourcing Shadow Accounting ![Picture of STP Perspectives](https://blog.stpis.com/hs-fs/hubfs/STP_Logo_Color_Tag-2.png?width=50&name=STP_Logo_Color_Tag-2.png) [STP Perspectives](https://blog.stpis.com/blog/author/stp-perspectives) Share: [facebook-f icon](http://www.facebook.com/share.php?u=https://blog.stpis.com/blog/5-key-benefits-of-outsourcing-shadow-accounting) [linkedin-in icon](http://www.linkedin.com/shareArticle?mini=true&url=https://blog.stpis.com/blog/5-key-benefits-of-outsourcing-shadow-accounting) [Twitter icon](https://twitter.com/intent/tweet?url=https://blog.stpis.com/blog/5-key-benefits-of-outsourcing-shadow-accounting) [pinterest-p icon](http://pinterest.com/pin/create/link/?url=https://blog.stpis.com/blog/5-key-benefits-of-outsourcing-shadow-accounting) [envelope icon](mailto:?body=https://blog.stpis.com/blog/5-key-benefits-of-outsourcing-shadow-accounting) 5 Key Benefits of Outsourcing Shadow Accounting 3:06 What is Shadow accounting for hedge funds? Shadow accounting is a practice utilized by investment managers to maintain a parallel set of fund financial records to check the accuracy of their primary portfolio and fund’s official Net Asset Value (NAV) calculation. # Top 5 Reasons Your Firm Should Consider an Outsourced Shadow NAV Solution 1.)  Independent review When a fund administrator maintains a shadow NAV for a hedge fund, they provide independent verification of a fund’s performance and valuation. While the primary book of record is essential for regulatory reporting, the shadow NAV serves a critical role in ensuring that discrepancies are identified and can be resolved quickly.  2.)  Cost Reduction An outsourced shadow accounting solution may appear to be an added expense; however, it may actually be a low-cost alternative for investment managers who typically do in-house.  Costs such as paying salaries for internal back-office operations staff and license fees for accounting software solutions can be mitigated. Those costs would no longer be necessary when shadow accounting is outsourced to a trusted third-party provider.  3.)  Mitigating Risk Shadow accounting may act as a risk mitigation tool by identifying potential errors in the fund records before statements are sent to investors. If an investment manager is utilizing a third-party administrator for the calculation of the fund NAV, as the final approver, the investment manager is still ultimately responsible for the accuracy of the calculations. Leveraging shadow accounting services to identify errors prior to sending statements to investors is a proactive approach that reduces the risk of reputational damage from restatements. 4.)  Access to Expertise Choosing to outsource to a trusted fund administrator grants an investment manager access to an experienced team of hedge fund accounting experts; a team that has access to top-of-the-line fund accounting software. This allows Investment managers more time to focus on the core of their business, providing superior returns while developing and maintaining investor relationships. 5.)  Commitment to Best Practices Choosing to outsource shadow accounting to a fund administrator signals to current and prospective clients that your organization values accuracy, transparency, and a commitment to excellence, you are dedicated to providing your clients with accurate reporting and are committed to following industry standards and best practices. # Choosing to Partner with a Trusted Fund Administrator As an investment manager in today’s competitive fund market, delivering accurate and timely information to investors is paramount to building trust. Outsourcing of many functions continues to trend upward for investment managers due to a myriad of benefits. Choosing to partner with a trusted fund administrator allows you to invest time back into core business drivers of investment strategy and client servicing while having the peace of mind that financial records are being reviewed with expertise. 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