Capital account reconciliation.
Consulting on independent reconciliation of quarterly capital account statements across a limited partner's fund positions, with factual identification of discrepancies for the client's follow-up with the manager.
Trust, with verification.
A capital account statement is a manager-prepared record of a limited partner's economic position in a fund as of a point in time. It reflects the partner's commitment, capital contributed, capital returned, allocated income and expenses, management fee and incentive accruals, and ending balance. It is the document a limited partner relies on most heavily, and the one most rarely verified.
Reconciliation of capital account statements is a defined operational activity. It involves rolling the prior period balance forward through the current period's capital activity and allocations, comparing the result to the statement as issued, and identifying any difference. Where the activity is consistent with the LPA mechanics as documented, the statement is confirmed. Where a discrepancy exists, the difference is identified, documented, and made available to the client.
The activity is operational and factual. It does not constitute audit, advice, or opinion on the manager's conduct. It produces a reconciled record that allows the client to engage the manager with specific questions rather than general concerns.
What reconciliation covers.
A defined operational scope, applied quarter-on-quarter across the client's fund positions.
- 01Baseline reconciliation
At engagement commencement, the prior four quarters are reconciled to establish a verified baseline. Discrepancies are documented and provided to the client.
- 02Ongoing quarterly reconciliation
Each quarter, on receipt of the capital account statement, the position is reconciled against the prior quarter, capital activity in the period, and the LPA's defined mechanics for fee accrual, expense allocation, and distribution waterfall.
- 03Discrepancy identification
Differences are categorised — fee calculation, expense allocation, distribution mechanics, NAV-roll arithmetic, side-letter entitlement, FX, timing — and documented factually. The categorisation is informational; the decision to engage the manager on any discrepancy is the client's.
- 04Side letter entitlement tracking
Where the client holds side letter rights — fee discounts, reporting transparency, co-investment access, MFN entitlements — the reconciliation includes verification that those entitlements have been reflected in the period's accounting.
- 05Year-end reconciliation against audited financials
On receipt of the fund's audited financial statements, the reconciled capital account is checked against the audited position. Differences are identified and documented.
What the client receives.
Reconciled record
A reconciled capital account record for each fund position, each quarter, showing prior balance, capital activity, allocations, and ending balance with the manager's statement.
Discrepancy log
A factual discrepancy log, where applicable, categorised by type and accompanied by the underlying calculation reference.
Side letter register
A side letter entitlement register and verification record, tracking which entitlements have been applied in each period.
Audited financials check
An annual reconciliation against audited financials, with differences between interim quarterly reporting and the audited position documented.
Quarterly summary memo
A summary memo for the client's records each quarter, capturing the position, the work performed, and any items for follow-up.
The reference standard.
Reconciliation is performed using the LPA, side letter, and supplementary fund documents as the reference standard. Fundtec's role is to identify whether the manager's reporting reconciles to the documented mechanics, not to opine on whether the mechanics themselves are fair, reasonable, or in the limited partner's interest. Questions of mechanics and economics are matters for the client's legal and investment advisors.
Common questions on reconciliation.
What is a capital account reconciliation?+
Reconciliation of capital account statements is a defined operational activity. It involves rolling the prior period balance forward through the current period's capital activity and allocations, comparing the result to the statement as issued, and identifying any difference. Where the activity is consistent with the LPA mechanics as documented, the statement is confirmed. Where a discrepancy exists, the difference is identified, documented, and made available to the client.
Is this an audit?+
No. The activity is operational and factual. It does not constitute audit, advice, or opinion on the manager's conduct. It produces a reconciled record that allows the client to engage the manager with specific questions rather than general concerns. Reconciliation is performed using the LPA, side letter, and supplementary fund documents as the reference standard.
What happens at engagement commencement?+
At engagement commencement, the prior four quarters are reconciled to establish a verified baseline. Discrepancies are documented and provided to the client. From there, each new quarter's capital account statement is reconciled on receipt.
How are discrepancies categorised?+
Differences are categorised — fee calculation, expense allocation, distribution mechanics, NAV-roll arithmetic, side-letter entitlement, FX, timing — and documented factually. The categorisation is informational; the decision to engage the manager on any discrepancy is the client's.
Does the engagement cover side letter entitlements?+
Yes. Where the client holds side letter rights — fee discounts, reporting transparency, co-investment access, MFN entitlements — the reconciliation includes verification that those entitlements have been reflected in the period's accounting.
A second look at the capital account.
A 30-minute discovery call to understand the structure of your positions, your current reporting cadence, and what is prompting the conversation.