|
|
||
| Now More Than Ever: How The Back Office is Big Business (cont.)
(continued from previous page) Since then, the Street march into hedge fund administration has continued. In 2006, JPMorgan Chase broke into the business with its deal for the back office of Paloma Partners Management. In 2007, Citi bought Bisys; today Citi has a $150 billion hedge-fund administration business. Meanwhile, BNY Mellon, Goldman Sachs and HSBC each have beefed up their hedge-fund administration. Business is booming. Jack McDonald, for one, isn’t surprised. “The growth in hedge fund administration is going to be a key trend in 2009,” McDonald, chief executive officer and president of Conifer Securities, says.
With just over $3 billion under administration, Conifer is a mid-sized hedge-fund administrator, letting the New York and San Francisco company stress its “service element,” McDonald says. McDonald became CEO in January 2008, and noted the built-in appeal to choosing an administrator with, as Jacobs says, “name recognition.” “No one is ever going to get fired for using IBM or Goldman Sachs,” McDonald says, adding that the customer service offered at a mid-sized provider “can’t be replicated” at a larger counterpart. That sentiment is under contest from Jacobs, who says SS&C is bent on proving “Big firm capability with small firm responsiveness.” Industry-wide, McDonald says, he has been taken note of the “fair amount of consolidation” in hedge fund administration of late. In August 2008, Butterfield Fund Service merged with Fulcrum Group. The subsequent Butterfield Fulcrum Group created a $100 billion hedge fund administrator. That April, Dublin, Ireland-headquartered Custom House Group merged with Equity Fund Trust. At No. 14 on the survey, Custom House has $27 billion under administration. Any wave of consolidation, according to McDonald, will give birth to a cadre of boutique startup business. “Most of what we have has come from internal growth,” says Jacobs, adding SS&C, which began its hedge fund administration business opened in 1995, began in earnest around 2000. The Windsor, Conn.-headquartered company has purchased Amicorp Group, EisnerFAST and OMR. In 2009, demand for hedge fund administration is at its peak. “It’s unbelievable,” says Di Anna. “There is more-and-more demand for greater transparency. McDonald noted Bernard Madoff, a reported Ponzi schemer who swindled an alleged $50 billion. “Madoff punctuated the trend for having an independent service provider,” says McDonald. That has led to an upsurge in due diligence. “The more market uncertainty there is, the more people ask for due diligence,” Jacobs says. “People are peeling back the onion.” Jacobs claims investors of SS&C hedge fund clients now investigate how the back office is handled. “We even get due diligence from counterparties,” emphasizes Di Anna. “More-and-more due diligence is happening,” McDonald says. Jacobs also says a hedge fund running its own back office while outsourcing to a hedge fund administrator is a growing trend. “We call it shadowing,” Jacobs says. Di Anna welcomed the trend. “When a hedge fund has someone in-house it is better for relating to each other,” she says. Technology is at the foundation of the hedge fund back office and Advent Software, the San Francisco vendor, has cornered the market. Its Geneva portfolio-accounting system is the weapon of choice not only in hedge-fund administration, but also in prime brokerage. But not everyone is beholden to Geneva. Di Anna notes Variman has the Calypso system, while SS&C, a technology powerhouse, has AdvisorWare and Total Return. “We don’t have to stand in line,” Jacobs says. Jacobs notes how the back office is at the forefront of linking people with technology. “Administration is people, process and technology,” he says. That combination is boding well for the back office in 2009. “We’re optimistic,” Jacobs says. | SPONSOR:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Copyright: © 2009 Channel Capital Group Inc., All Rights Reserved | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||