Written by Parastu Aghai, Director · Last reviewed 29 October 2026
Working with investment funds, I regularly come across questions that sound straightforward at first, but often become much more complicated once you look at the regulatory structure.
So I am starting a short Fund Problems – Q&A Series, covering some of the practical issues that arise when establishing and operating funds in the UAE.
Fund Operations: Who Is Actually Responsible?
Establishing a fund is one thing. Operating it in compliance with regulatory requirements is another.
Q1: The fund administrator calculates the NAV. Is the fund manager still responsible?
Yes. Outsourcing the calculation does not automatically transfer regulatory accountability.
Fund managers frequently appoint third-party administrators to calculate the Net Asset Value (NAV), maintain accounting records and prepare investor reports.
However, the fund manager cannot simply assume that the administrator’s calculations are correct.
The manager must maintain appropriate oversight, which may include:
- Reviewing the valuation methodology and NAV calculation process.
- Understanding how illiquid or difficult-to-value assets are priced.
- Monitoring valuation exceptions and material discrepancies.
- Ensuring that valuation errors are investigated and appropriately addressed.
The precise allocation of responsibilities depends on the applicable fund regime and contractual arrangements.
Key takeaway: The administrator may calculate the NAV, but the fund manager must understand and oversee the process.
Q2: What happens if a fund breaches its investment restrictions?
Imagine a fund whose investment mandate limits exposure to a particular asset class or investment.
Due to market movements, an investment decision or an operational error, that limit is exceeded.
Does this automatically constitute a reportable regulatory breach?
Not necessarily. The circumstances matter.
The fund manager needs to establish whether the breach resulted from an active investment decision or passive market movements, assess the applicable rules and fund documents, and determine the appropriate corrective action.
Important considerations include:
- Whether the breach is temporary or ongoing.
- Whether the breach was intentional or unintentional.
- Whether the fund’s constitutional or offering documents have been breached.
- Whether investor notification or regulatory reporting is required.
- Whether remediation can be undertaken without adversely affecting investors.
The manager should document its assessment, corrective measures and any necessary escalation.
Key takeaway: Identifying a breach is only the beginning. The real regulatory challenge is determining how it should be managed, documented and, where required, reported.
Q3: We have appointed a fund administrator. What does ongoing regulatory oversight actually involve?
This is one of the most underestimated aspects of fund management.
A fund administrator may be responsible for subscriptions, redemptions, investor records, NAV calculations and financial reporting.
But appointing an experienced administrator does not mean that the fund manager can rely on the administrator without further scrutiny.
Effective oversight generally involves:
- Conducting initial and ongoing due diligence.
- Clearly defining responsibilities and reporting obligations.
- Reviewing periodic administrator reports.
- Monitoring operational errors and service-level performance.
- Establishing escalation procedures for material issues.
- Periodically assessing whether the administrator remains suitable.
The level of oversight should be proportionate to the nature, scale and complexity of the fund and the outsourced activities.
Key takeaway: Outsourcing is not simply a contractual arrangement. It is an ongoing governance responsibility.
More questions from practice in Series 4.
