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Partnership Accounting
We divide the partnership accounting process into four subject areas:
Portfolio Accounting
The first task is to determine the ingredients of portfolio change during each month, separating out capital additions and withdrawals and expense payments from portfolio performance. Performance must be broken down into its components of realized gains and losses, change in unrealized gains, and other forms of income. Add in cash and transactional detail and we have enough information to create monthly financial statements and to allocate net income or loss among investors. We generally obtain this data directly from your prime broker.
Partnership Allocations
Once the ingredients of portfolio change are known and adjusted for accruals and amortization, the fund gain or loss is apportioned among the participants. Depending on the fee and incentive arrangements set forth for the structure of the fund, a "contingent net" capital account value (net of contingent incentive allocations that may not be actually allocated until year-end) is produced for every participant. Because our accounting procedure has all the required detail, we produce full financial statements monthly (sans notes) allowing you to accept new investors each month with confidence.
Tax and Audit
Because your investors rely on our numbers, we reconcile our accounts to paper statements each month. Our systems are dynamic. Adjustments made in the reconciliation process automatically update participant accounts in current and, if deemed necessary, prior periods. When practicable, we will provide year to date tax allocations to participants in the fund.
Expenses and Withdrawals
APM helps effectuate all disbursements from the fund. Managers provide APM with withdrawal notices and invoices from other service providers and we create Letters of Authorization for the manager's signature to direct the custodian to make disbursements. Additionally, APM will help facilitate financial controls procedures as required and permitted by the custodian. Typically, APM-administered funds (in liquid securities) pay out approximately 95% to 98% of a full participant withdrawal within a few days after the withdrawal date and the balance after reconciliation of the current and one subsequent period.