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PennyWorks

For Fund Administrators

This page is for two readers. One is a fund administrator with a client whose digital asset portfolio has become the reason the close slips. The other is a fund whose administrator handles everything well except that portfolio.

In both cases the answer is the same: have PennyWorks handle the digital asset component of the books.

Why digital assets break a process that works

Section titled “Why digital assets break a process that works”

Fund administration is a real discipline and the people doing it are good at it. The process assumes things that hold almost everywhere: an instrument has a quote, a custodian confirms a position, a broker hands over a trade file, and the book is close to complete before anyone starts reconciling.

A digital asset portfolio satisfies none of those assumptions. There is no trade file. Positions live in smart contracts and have to be discovered rather than confirmed. Many of them have no market quote at all. And the activity carries no label saying what it was, so the intent behind a transfer has to be reconstructed before it can be booked.

So a small share of the book delays the whole NAV, and puts your team in a spreadsheet the night before it is due. Nobody was careless. A specialist problem sits inside a generalist process, and that shape of problem gets outsourced in every other corner of this industry.

What actually goes wrong, specifically

Section titled “What actually goes wrong, specifically”

Vague versions of this argument are easy to nod along with and impossible to act on. So here are the concrete ones, the failures that actually show up in a reconciliation:

  • Positions nobody knew to look for. A snapshot tool reports what it supports, so a vault it has never seen simply does not appear on your book. An absent position stays quiet.
  • Marks that were never prices. LP tokens, yield tokens and vault shares get par-priced or read off a dApp screen, which misstates the position before the accounting starts.
  • Income with no transaction behind it. Interest accrues block by block with no event to book, so the book understates the fund until a claim finally lands.
  • Transfers booked as the wrong thing. A bridge leg read as a disposal creates a taxable event that never happened, and the entry still balances, so nothing catches it.
  • Value in flight. Assets between venues or mid-bridge belong to somebody at all times, and a process that only reads endpoints drops them.

Each of these produces a number that looks reasonable. Nobody checks a number that looks reasonable. A wrong DeFi entry does not fail loudly, it ties out, and the first person to notice is an auditor or an LP.

What PennyWorks does here

Section titled “What PennyWorks does here”

PennyWorks does the shadow accounting. We build a fund’s DeFi books from read-only access, reconciled to the chain, with every figure tracing back to the transaction it came from, and hand them to the administrator producing the official NAV.

The split works like this:

  • The administrator keeps the client, the official NAV of record, investor services, and the regulatory standing that goes with all three.
  • PennyWorks takes the part that does not fit the process: decoding the activity, pricing the positions with no quote, and reconciling the result to the chain.

PennyWorks is not a licensed fund administrator, does not produce anyone’s official NAV of record, and is not trying to. That boundary makes the arrangement work, rather than qualifying it.

Why buy this rather than build it

Section titled “Why buy this rather than build it”

An administrator can build DeFi coverage, and some will. Be clear-eyed about what that commits to, because the first protocol costs almost nothing, and software barely enters into it.

Three things have to be true of whoever books DeFi activity. They have to know DeFi properly: what a leverage loop is doing, why a Pendle PT is not the token it looks like, what a cross-chain intent settles into. They have to know accounting properly. And it has to be their job, so that they are on the hook when the close is due.

You already have two of them, which is more than most funds can say. Fund accounting is your discipline and the close is your obligation. You are missing the first leg, and no license sells it, because it arrives as a person rather than a product. That hire fails for the same reason the work lands on the portfolio manager at a fund with no administrator: the overlap barely exists as a labor pool, so you are not filling a role, you are training one. Then that person becomes a single point of failure sitting across every digital asset client you have.

Meanwhile protocols keep shipping, and each one arrives as a new set of rules for what its activity means. So coverage behaves like a standing engineering obligation that grows with the market rather than a project that completes, and it keeps growing for a component that stays small on most books. That arithmetic works for a firm whose whole business is this. It rarely works for a firm whose business is fund administration.

If you are the fund, not the administrator

Section titled “If you are the fund, not the administrator”

You can close this gap without changing administrator, and starting that conversation is usually worse than the problem you have. Your useful first move is narrower: find out how your digital asset portfolio is actually being handled today.

The questions to ask are set out in how to evaluate a DeFi NAV provider, and they work just as well on the administrator you have as on one you are considering. If the answers go vague on pricing the hard positions, or on what reconciliation does with a difference, you have found the gap this page describes, and you can fill it while leaving everything else alone.

Section titled “Related”