As a fund administrator, much of your responsibility revolves around assigning the value for gains and losses in the fund to individual partners in order to determine their tax responsibility. This crucial process of partnership accounting is done through one of two methods: aggregation and tax layering.

Aggregation, also known as NAV Light, assigns tax liability for realized gains and losses based on each partner’s proportional share of unrealized appreciation in the overall fund. It is a very widely-used solution to the problem of how to “do” partnership accounting, but it ultimately shortchanges investors by not tracking activity on an individual basis. In exchange for simpler math, NAV Light introduces unfair inefficiencies that degrade the quality of a fund for partners and prospective partners.

Tax layering attributes gains and losses to partners only over their period of participation, tracking each investor individually with their own “micro-portfolio.” This can bring exacting accuracy and fairness to your fund, but at a high cost: hundreds of hours spent creating and manipulating delicate, error-prone spreadsheets, or thousands of dollars spent on “enterprise” portfolio management software that overwhelms with features and underwhelms when it comes to customer service.

Regardless of which method you use, there’s no doubt you’re familiar with the time-consuming steps involved in doing partnership accounting and rolling up the results to issue regular, fully-auditable performance statements for partners. “Sure, doing tax layering sounds great,” you’re thinking, “but just doing NAV Light is complicated enough for a fund like mine! Whether we’re talking time or money, can I even afford to switch?”  It’s a lot to think about.

Here at PortfolioShop, we spend a lot of time thinking about what people like you are thinking about, and then we turn it into software that thinks like you. Along with our clients, we’ve pondered this particular problem for a long time, and now we have a question or two for you: What if partnership accounting wasn’t something you had to “do” at all? What if it just…happened?

With PartnershipPulse, the newest module of our ReconAdvantage portfolio management platform, it just…does! PartnershipPulse extends ReconAdvantage’s proven portfolio accounting engine and report distribution service with partnership accounting functionality, drastically reducing the effort, error, and expense involved in fund administration. PartnershipPulse transforms tax layering from a time-and-labor-intensive task you “do” into an automated process that runs in minutes, freeing you up to focus on actually administering your fund.

We’re excited to help you bring the accuracy and equitability of tax layering to your partnership. Between ReconAdvantage’s broad prime broker support and PortfolioShop’s team of expert accountants, we can get you set up with PartnershipPulse right away, no matter how or where you keep your books. Once you’re up and running, you and your investors will have access to our full range of on-demand and scheduled reporting through our cloud-based portal.

PartnershipPulse empowers you to accomplish these key Partnership Accounting tasks

Improve Operational Efficiency

Roll periods in minutes, create and distribute up-to-date reports in seconds

Maintain Unlimited Side Pockets

Manage multiple side pockets with different levels of investor participation and aggregate them all with a single click

Track Key Performance Benchmarks

Track high-water mark and hurdle rates on a per-investor basis for calculating incentive fees, waterfalls, clawbacks, and more

Manage Capital Activity

A robust interface for managing contributions, withdrawals, and transfers, instantly adjusts your investors’ shares of the fund for tax layering and other allocations

Issue Automated Statements

Customized period-end statements sent directly to your partners’ inboxes

Set Flexible Fee Schedules

Management and incentive fees can be maintained at the fund or investor level and waived for any period

with key ReconAdvantage features, including

Cloud-based Portal

Our easy-to-use portal provides access for your staff and tax professionals to understand performance at a glance and to create statements and reports for delivery to your partners.

Import from Anywhere

With built-in support for most prime brokers’ data feeds and flexible handling of custom spreadsheet uploads, you can get your fund’s data into ReconAdvantage quickly and easily.

Multi-currency Reporting

Maintain assets in local currencies and report on FX gains and losses while reporting portfolio value and investor NAV in the appropriate base currency.

Case Study

Leaving Spreadsheets Behind

Unlike many colleagues who switched to NAV Light for expediency’s sake, Jerrold Silverman stuck with tax layering as the method of accounting for his fund. From month to month and year to year, with each tab, formula, and side pocket, the fund’s master spreadsheet grew ever-more unwieldy and error-prone, with rollups taking hours to complete and audit. Jerrold came to PortfolioShop seeking to increase accuracy and efficiency; he got that and a whole lot more.

“Onboarding the fund to ReconAdvantage was a simple task. While I was familiar with it as a platform for data aggregation, custodian reconciliation, and performance reporting, I was genuinely blown away when I saw these tasks handled in PartnershipPulse. Suddenly, I had the ability to drill down and share performance at a tax-lot level on a per-investor basis and then ‘zoom out’ to see all those values seamlessly reconciled to the overall portfolio.”

“After more than a year on PartnershipPulse, I’ve closed multiple reporting cycles and breezed through two financial statement audits with record lows for time spent and effort expended. In addition, I am now able to provide additional reporting to my clients for their funds and investors that was not possible while I was working on spreadsheets. I’m able to do more in less time, providing greater value to my clients, enabling me to increase my billing and profitability.”

“I couldn’t be more pleased with PartnershipPulse and look forward to working with PortfolioShop on more of my fund clients.”

Jerrold Silverman, CPASilverman, Neu LLP
NAV Letter generated by PartnershipPulse

An example of a quarterly performance statement generated by PartnershipPulse. Statements are customizable with your firm’s logo and messaging.

Whether you administer an endowment, hedge fund, private equity fund, or any of the many other partnership vehicles available today, we believe you and your investors can benefit from the sophisticated partnership accounting tools available in PartnershipPulse. If you’ve got questions or would like to see it in action, get in touch with us to learn more– even if you want to stick with NAV Light!

Want to See Our Software in Action?