Fund bank accounts are the operational foundation of investment funds. Their setup and control protocols directly impact fund transparency, investor trust, and regulatory compliance. This article outlines the types of accounts used, how they’re structured, and the control mechanisms that safeguard fund assets.
1. Types of Fund Bank Accounts
Each fund typically maintains multiple bank accounts, each serving a distinct purpose:
Subscription Account: Receives investor capital during fundraising or capital call periods.
Operating Account: Handles day-to-day expenses such as management fees, vendor payments, and fund-level costs.
Distribution Account: Holds proceeds from asset sales or income distributions before payout to investors.
Escrow Account: Temporarily holds funds for specific transactions, such as closings or indemnification reserves.
SPV Accounts: Special Purpose Vehicles often maintain separate accounts for asset-level operations or financing.
Segregating these accounts by function ensures clarity in fund flows and simplifies audits and reporting.
2. Structural Considerations
Bank account structures vary based on fund complexity, jurisdiction, and service provider setup. Key structural decisions include:
Entity-Level Segregation: Accounts are opened under the legal name of the fund, SPV, or management company to align ownership and liability.
Banking Relationships: Sponsors may use one or multiple banks depending on FX needs, jurisdictional coverage, or operational preferences.
Master/Sub-Account Hierarchies: Some sponsors centralize control while maintaining entity-level reporting through hierarchical account setups.
Sponsors must balance operational efficiency with the need for transparency and control, especially when managing multiple entities or jurisdictions.
3. Control Protocols and Best Practices
Robust control protocols are essential to prevent fraud, ensure compliance, and support investor confidence. Common practices include:
Dual Authorization: Payments require approval from two authorized individuals, often from different teams.
Role-Based Access Controls: Bank access is limited by role, view-only, transaction initiation, or approval.
Daily Reconciliation: Treasury teams reconcile bank activity daily to detect discrepancies early.
Audit Trails: All transactions are logged with timestamps, approvers, and supporting documentation.
Third-Party Oversight: Fund administrators often assist with account setup, reconciliation, and reporting.
Additional safeguards include ACH blocks and filters, positive pay services, and periodic reviews of account access and signatory authority.
4. Technology in Treasury & Cash Management
Technology is transforming how fund sponsors manage treasury operations. From automation to real-time visibility, here are the key categories of tools and systems in use today:
Treasury Management Systems (TMS)
These platforms centralize cash, liquidity, and risk management across entities. Key features include:
Real-time cash position tracking
Automated bank reconciliation
FX and interest rate risk management
Debt and investment tracking
Integration with ERP and fund accounting systems
Bank Connectivity & APIs
Modern treasury teams rely on direct bank feeds and APIs to:
Pull real-time transaction data
Initiate payments securely
Monitor account balances across jurisdictions
APIs reduce manual data entry and improve reconciliation speed, especially for multi-bank setups.
Final Thoughts
Sponsors who invest in thoughtful account structures, strong control protocols, and modern treasury technology reduce risk, improve transparency, and build trust with investors. As treasury functions become more digital and integrated, the opportunity to enhance fund operations is greater than ever.