Fund Accounting Basics for Finance Staff in Asset Management

Fund accounting is a distinctive discipline within finance, central to the asset management sector, and one that a finance professional moving into asset management encounters as something genuinely different from the corporate accounting they may be used to. Where corporate accounting concerns the finances of a trading business, fund accounting concerns the accounting for investment funds — the pooled investment vehicles that asset managers run on behalf of investors — and it has its own concepts, its own rhythms, and its own priorities. For a finance professional in or joining the asset management sector, understanding the basics of fund accounting is important, because it is the accounting that underpins the funds the business exists to manage, and it differs in important ways from the corporate accounting elsewhere. This guide introduces the basics of fund accounting for finance staff in asset management.

This guide is written for finance professionals in or joining asset management who want to understand the basics of fund accounting. It covers what fund accounting is and how it differs from corporate accounting, the central concept of net asset value, what fund accounting involves in practice, the role of the various parties, and what finance staff need to understand. It is an introduction to the discipline aimed at finance professionals rather than a detailed technical manual, and the specifics of fund accounting depend on the funds, their structures, and the applicable requirements, for which the relevant standards, the fund documentation, and specialist expertise are the references. The aim is the foundational understanding a finance professional needs to grasp what fund accounting is and how it works, as an orientation to a discipline central to the asset management sector.

We have also added practical material that finance staff and hiring managers regularly ask about: a worked NAV calculation with figures that add up, the main UK fund structures, the Investment Association’s SORP for authorised funds, how management and performance fees are accrued, the difference between a fund’s accounts and the management company’s accounts, and what fund accounting roles typically pay. For the wider picture of finance in the sector, see our guide to finance in asset management.

What Fund Accounting Is and How It Differs

Fund accounting is the accounting for investment funds — the pooled vehicles through which investors’ money is collected and invested — concerned with accounting for the fund’s assets, its investments, its income and expenses, and the interests of the investors in it. It differs from corporate accounting, which concerns the finances of a trading business, because a fund is not a trading business but an investment vehicle, and the accounting reflects this different nature. Where corporate accounting focuses on the business’s trading, its profit, and its financial position as a going concern, fund accounting focuses on the fund’s investments, their value, the income they generate, and the value of the investors’ interests in the fund.

This different focus gives fund accounting its distinctive character. The central concern is the value of the fund and the investors’ interests in it, rather than the profit of a trading business. The accounting revolves around the fund’s investments and their valuation, the calculation of the fund’s value, and the accounting for the investors’ subscriptions, redemptions and interests. The rhythms differ too, with fund accounting often oriented around the regular calculation of the fund’s value rather than the periodic reporting cycle of corporate accounting. A finance professional moving from corporate accounting to fund accounting therefore encounters a discipline with a different focus and different concepts, which must be learned. Understanding that fund accounting is the accounting for investment funds, differing from corporate accounting in its focus on the fund’s value and the investors’ interests rather than a trading business’s profit, is the foundation of understanding the discipline, and it explains why fund accounting feels different to a finance professional used to corporate accounting.

Common UK Fund Structures

The structure of a fund shapes its accounting, its governance and the parties around it. The main vehicles a finance professional will meet in the UK are summarised below. Authorised funds are approved by the FCA and are generally open-ended, meaning units or shares are created and cancelled as investors subscribe and redeem; closed-ended and private vehicles work differently.

Investment trusts report under the Association of Investment Companies’ own AIC SORP, while private fund limited partnerships typically prepare accounts under FRS 102 or IFRS as the partnership agreement and investors require. Moving between these worlds is common in a fund accounting career, and the differences in reporting are one reason employers value candidates who have seen more than one structure.

The Central Concept: Net Asset Value

At the heart of fund accounting is the concept of net asset value (NAV) — the value of the fund, calculated as the value of its assets less its liabilities — which is central to fund accounting in a way that has no exact equivalent in ordinary corporate accounting. The NAV represents what the fund is worth, and it is fundamental because it determines the value of the investors’ interests: an investor’s stake in the fund is worth their share of the NAV, so the NAV is what values the investors’ holdings, prices their subscriptions and redemptions, and measures the fund’s performance. Calculating the NAV accurately is therefore central to fund accounting, because so much depends on it.

The calculation of the NAV involves valuing the fund’s assets — principally its investments — and deducting its liabilities, to arrive at the net value of the fund, which is then divided among the investors according to their holdings to give the value per share or unit. This calculation is often performed regularly — the NAV is calculated at defined valuation points, which for many funds is frequent — because the NAV is needed to price the investors’ dealings and to report the fund’s value on an ongoing basis. The regular, accurate calculation of the NAV is a central activity of fund accounting, and much of the discipline revolves around it. Understanding that the NAV is the central concept — the value of the fund that determines the investors’ interests and drives so much of fund accounting — is the key to understanding the discipline, because the NAV is what fund accounting is largely about. A finance professional in asset management must understand the NAV, because it is central to the accounting for the funds the business manages, and its accurate calculation is fundamental.

A Worked NAV Calculation

The figures below are illustrative only, for a single-class open-ended fund at a month-end valuation point. They show how the balance sheet of a fund turns into a price per unit.

Total liabilities are £650,000, so the NAV is £101,100,000 less £650,000, or £100,450,000. Dividing by 80,360,000 units gives exactly £1.25, or 125.00p per unit. An investor subscribing £50,000 at that price receives 40,000 new units, and the fund’s NAV and units in issue both rise accordingly; a redemption works in reverse. The management charge line shows why accruals matter: £100m at 0.75% a year is £750,000, or £62,500 a month, and if that accrual were missed the NAV per unit would be overstated by roughly 0.08p — small per unit, but material across every investor dealing at that price.

In practice there are further layers. Umbrella funds strike a separate NAV for each sub-fund and share class, with class-specific fees and hedging. Funds may apply dilution adjustments or swing pricing so that the costs of large subscriptions and redemptions fall on the dealing investors rather than those who stay in. Income funds track an income reserve for distributions. Each of these is a source of NAV error if the controls are weak.

What Fund Accounting Involves in Practice

In practice, fund accounting involves a range of activities centred on maintaining the fund’s accounts and calculating its value. It involves accounting for the fund’s investments — recording them, valuing them, and accounting for the transactions in them as the fund buys and sells — which is central because the investments are the fund’s principal assets. It involves accounting for the fund’s income and expenses — the income the investments generate, the fees and costs of running the fund — which affect the fund’s value and the investors’ returns. And it involves accounting for the investors’ dealings — their subscriptions into the fund and redemptions out of it — which change the fund’s size and the investors’ holdings.

Central to the practice is the calculation of the NAV at the valuation points, bringing together the valuation of the assets, the liabilities, and the resulting net value, to price the fund and value the investors’ interests. This regular NAV calculation is a defining rhythm of fund accounting, often requiring the accounts to be brought to a state where the NAV can be struck accurately at each valuation point. Fund accounting also involves the reporting on the fund — to investors, to the regulator where applicable, and to others — and the various controls and reconciliations that ensure the fund’s accounting is accurate, which matters greatly because the NAV and the investors’ interests depend on it. Understanding what fund accounting involves in practice — accounting for the investments, the income and expenses, the investors’ dealings, the regular NAV calculation, and the reporting and controls — gives a finance professional a picture of the discipline’s activities. The practice centres on maintaining the fund’s accounts accurately and calculating its value regularly and correctly, which is the essence of fund accounting work.

Financial Statements for Authorised Funds: the IA SORP

UK authorised funds prepare their annual and interim financial statements under FRS 102 and the Statement of Recommended Practice for the financial statements of authorised funds, issued by the Investment Association (the IA, formerly the Investment Management Association, or IMA). The current edition of the IA SORP was issued in October 2025, replacing the 2014 edition, and FCA rules require it for accounting periods beginning on or after 1 January 2026, so interim reports to 30 June 2026 and the first 31 December 2026 year ends are in scope.

The changes most relevant to fund accountants include valuing listed investments at mid-market rather than bid prices, a simpler presentation of transaction costs, risk disclosures aligned more closely with FRS 102, fair value hierarchy disclosures folded into the investment analysis, tighter guidance on distributions and income allocation, and new disclosures on how the authorised fund manager reached its going concern conclusion. ICAEW maintains a useful resource page on authorised funds accounting. Candidates who have taken a fund range through its first reporting cycle under the 2025 SORP are, unsurprisingly, in demand. If you are weighing up the accounting frameworks more broadly, our guide to IFRS versus UK GAAP in practice covers the wider choice.

Fees: Management Fees, Performance Fees and the High-Water Mark

Fees are one of the most common sources of NAV questions. The annual management charge is normally a percentage of NAV, accrued at each valuation point and paid to the manager monthly or quarterly. Other fund expenses — depositary, custody, administration, audit and registration — are accrued the same way, and together they feed the ongoing charges figure disclosed to investors.

Performance fees are less common in UK authorised retail funds but are standard in many hedge funds and some specialist mandates, while private equity uses carried interest instead. A typical performance fee is a share of the gain above a high-water mark — the highest NAV per share on which a fee has previously been paid — so that the manager is not paid twice for recovering the same ground. As an illustration: if the high-water mark is 110.00p and the NAV per share ends the period at 121.00p, a 20% fee on the 11.00p gain is 2.20p per share, leaving a post-fee NAV of 118.80p, which becomes the new high-water mark. If the next year ends at 115.00p, no fee is due, and none will be until the NAV climbs back above 118.80p. Some funds also apply a hurdle rate, and many use equalisation or series accounting so that investors who joined at different prices pay a fair share. Getting the accrual right at every valuation point, not just at the crystallisation date, is the fund accountant’s job.

The Role of the Various Parties

Fund accounting in asset management typically involves various parties, and understanding their roles helps a finance professional understand how fund accounting is organised. The asset manager runs the fund — making the investment decisions and managing the fund — but the fund accounting itself is often performed by a specialist administrator or by a dedicated fund accounting function, reflecting its specialist nature. In many arrangements, a fund administrator — a specialist third party — performs the fund accounting, including the NAV calculation, on behalf of the fund, while in others the asset manager performs it in-house. The finance professional in asset management may work with the administrator, oversee the fund accounting, or be involved in performing it, depending on the arrangement.

Other parties are typically involved too. A depositary or custodian holds the fund’s assets and provides oversight, adding a layer of protection and independence. Auditors audit the fund. And the regulator, where the fund is regulated, oversees it. These parties together form the structure within which the fund operates and is accounted for, providing the specialist functions, the oversight, and the protection that funds require. A finance professional in asset management works within this structure, and understanding the roles of the various parties — the asset manager, the administrator, the depositary or custodian, the auditors, the regulator — helps them understand how fund accounting is organised and where their own role fits. The involvement of these various parties is a distinctive feature of the fund world, reflecting the specialist nature of fund accounting and the importance of oversight and protection in managing investors’ money. Understanding the structure is part of understanding fund accounting in asset management.

Depositary, Administrator and Transfer Agent in More Detail

For an authorised fund, the depositary (or trustee, for a unit trust) does more than hold assets. It safekeeps the investments, monitors the fund’s cash flows, and oversees the authorised fund manager — checking, among other things, that the fund is valued and priced correctly, that dealing follows the prospectus and that investment limits are respected. A NAV error will usually be reported to the depositary, which takes a view on whether investors need compensating.

Where administration is outsourced, the manager remains responsible for it. The administrator typically strikes the NAV, maintains the fund’s books and prepares draft financial statements, while a transfer agent keeps the register of unitholders and processes dealing. The in-house finance or fund oversight team checks the administrator’s output, reviews price movements against expectations, signs off stale or fair-valued prices, and manages the relationship through service level agreements and key performance indicators. Oversight of outsourced fund accounting is now one of the most common job briefs we see in the sector, and it suits accountants who combine technical knowledge with the confidence to challenge a large third party.

Fund Accounts vs Management Company Accounts

A common point of confusion for newcomers is that an asset management group has two quite different sets of books. The funds are separate vehicles: their assets belong to investors, are ring-fenced from the manager and are reported in each fund’s own SORP-based financial statements. The management company is an ordinary company that earns fee income from the funds and mandates it manages, pays staff and overheads, and prepares statutory accounts under FRS 102 or IFRS like any other business.

The management company is also the regulated firm, and that brings prudential obligations. A UK UCITS management company or alternative investment fund manager is subject to capital requirements in the FCA’s IPRU-INV rules, and a manager that also carries on MiFID business such as segregated portfolio management — a collective portfolio management investment firm — is brought within the investment firms prudential regime as well, with own funds and liquidity requirements, an Internal Capital Adequacy and Risk Assessment (ICARA) and the MIFIDPRU regulatory returns. Our guides to regulatory capital, the IFPR and the ICARA and the MIFIDPRU reporting skills employers look for explain that side in detail. In short, the fund accountant looks after investors’ money, while the management company’s Financial Controller looks after the manager’s own profit, capital and regulatory position — the subject of our page on Financial Controller recruitment in asset management.

What Finance Staff Need to Understand

A finance professional in asset management needs to understand the basics of fund accounting to work effectively in the sector, even if they are not performing the detailed fund accounting themselves. They need to understand what fund accounting is and how it differs from corporate accounting, so they grasp the distinctive nature of the accounting that underpins the funds. They need to understand the NAV and its centrality, because it is fundamental to the funds and to so much of what the business does. And they need to understand, at a basic level, what fund accounting involves and how it is organised, so they can work within the fund world and with the parties involved.

The depth of understanding a finance professional needs depends on their role — those directly involved in fund accounting need detailed, specialist knowledge, while those in other finance roles in asset management need enough understanding of fund accounting to work effectively in the sector and understand the funds the business manages. A finance professional moving into asset management should develop the level of fund accounting understanding their role requires, drawing on the specialist expertise, the fund documentation, and the relevant standards for the detail. Understanding what finance staff need to understand about fund accounting — the nature of the discipline, the NAV, the basics of the practice and the structure, to the depth their role requires — helps a finance professional orient themselves to the asset management sector and its distinctive accounting. Fund accounting is central to asset management, and a finance professional in the sector needs to understand its basics, developing deeper knowledge where their role requires it. The finance professionals who understand fund accounting well are valuable in the asset management sector, because it is a specialist discipline central to the sector’s work. This connects to the broader regulated-sector context covered in our guide on a first job at an FCA-regulated firm.

A practical checklist for someone joining an asset manager’s finance team:

• Read the prospectus and instrument of incorporation or trust deed for the main funds — they set the valuation point, pricing basis, fee terms and dealing rules.
• Learn how the management company earns its revenue: fee rates by fund and share class, rebates, and how assets under management drive the budget.
• Understand who strikes the NAV, who checks it, and what the error and breach escalation process is.
• Get to know the regulatory calendar: the management company’s capital and liquidity returns, the ICARA cycle and the fund reporting deadlines.
• Know where client money and custody rules apply, and the senior manager responsibilities that sit over finance.

For the last two points, our introductions to CASS and client money and the Senior Managers and Certification Regime for finance teams are good starting points.

The Importance of Accuracy in the NAV

A point worth emphasising for a finance professional in asset management is the importance of accuracy in the NAV, because so much depends on it and errors have real consequences. The NAV determines the value of the investors’ interests, prices their subscriptions and redemptions, and measures the fund’s performance, which means an error in the NAV can misprice the investors’ dealings — causing some investors to pay too much or receive too little — and misrepresent the fund’s value and performance. An inaccurate NAV therefore directly affects the investors, potentially to their detriment, which is why the accurate calculation of the NAV is treated with such importance in fund accounting.

This importance means that the NAV calculation must be performed accurately and with appropriate controls, checks and oversight, because the consequences of an error fall on the investors and on the integrity of the fund. The valuation of the assets must be sound, the calculation correct, and the resulting NAV verified, because errors could misprice the investors’ interests. NAV errors, where they occur, can require correction and can have consequences for the fund and the investors affected. A finance professional involved in fund accounting must therefore appreciate the importance of NAV accuracy and perform or oversee the NAV calculation with the care it demands. Understanding the importance of accuracy in the NAV — because errors affect the investors and the fund directly — underscores why the NAV calculation is central to fund accounting and why it must be done accurately. The accuracy of the NAV is fundamental, and a finance professional in asset management must appreciate its importance and the care its calculation requires.

The controls that prevent most errors are unglamorous: daily cash and stock reconciliations against the custodian, tolerance checks that flag price movements outside expected ranges, independent review of stale, suspended or manually priced securities, corporate action checks, and a second pair of eyes on fee and expense accruals. For authorised funds, the FCA’s rules set out when a pricing error is significant enough to require correction and compensation for affected investors, and the depositary is involved in that judgement. A finance team that can evidence these controls makes the auditor’s and the depositary’s work easier and gives the board comfort.

Fund Accounting Roles and Pay

Fund accounting careers usually start in a fund administrator, custodian bank or the audit practice of a firm with an asset management client base, then move in-house to an asset manager’s fund oversight or product finance team, or across to the management company’s finance function. The main roles are:

• Fund accountant — strikes or checks daily NAVs, processes trades, income and corporate actions, and reconciles to the custodian.
• Senior fund accountant / fund financial reporting — prepares annual and interim financial statements under the SORP and handles the audit.
• Fund oversight manager — oversees outsourced administrators, investigates pricing errors and reports to the fund board and depositary.
• Management company Financial Controller or Finance Manager — owns the manager’s own accounts, budgets, regulatory capital, ICARA and returns.

Pay depends on the vehicle, the location and whether the role carries regulatory responsibility. As a broad guide, regulated-sector finance roles typically pay 15–25% above an equivalent commercial role, reflecting the scarcity of people who understand the rules; our article on why regulated finance roles pay more explains the reasons. For comparison, a London Financial Accountant with two to five years’ post-qualification experience typically earns £60k–£75k in a commercial business, and a London Finance Manager £55k–£70k, before any sector premium. Detailed fund-specific ranges are in our fund accountant job description and salary guide and the wider regulated firm finance salary guide.

Interim fund accountants and Financial Controllers are often brought in for a SORP transition, an administrator change, a fund launch or a year-end backlog; interim Financial Controllers in London typically command £400–£650 a day. Where the brief is a Chief Financial Officer or Finance Director for the manager itself, our sister firm FD Capital runs those searches, and senior compliance and SMF16/17 appointments go to SMF Capital. If you are moving across from a commercial role, our guide to moving from non-regulated to regulated finance is a good next read.

Fund Accounting FAQ

What is the difference between NAV and NAV per unit?

NAV is the fund’s total assets less its liabilities at a valuation point. NAV per unit (or per share) is that total divided by the number of units in issue for the relevant class, and it is the price at which investors deal, subject to any dilution adjustment or swing pricing.

Which accounting standards apply to UK authorised funds?

UK authorised funds report under FRS 102 together with the IA SORP. The 2025 edition applies to accounting periods beginning on or after 1 January 2026. Investment trusts follow the AIC SORP, and private fund partnerships follow whatever basis the partnership agreement sets, usually FRS 102 or IFRS.

Can a corporate accountant move into fund accounting?

Yes. Qualified ACA, ACCA and CIMA accountants move across regularly, particularly into management company finance roles where the core skills are familiar. Pure fund accounting roles favour people who have done NAV work at an administrator or audited funds, but strong technical accountants who learn the SORP and the pricing rules adapt well.

Does the fund itself have regulatory capital requirements?

The capital requirements sit with the regulated management company, not with the investors’ fund. Funds have their own investment and borrowing limits and liquidity management rules, but the own funds, liquidity and ICARA obligations belong to the manager.

How quickly can you find a fund accountant or asset management FC?

We respond to every brief the same working day. Permanent shortlists typically follow within one to two weeks, and interim or fractional candidates are usually available within days. For specialist regulated roles we also draw on our FCA-regulated firms recruitment network.