In December, Fred Jacobs joined SS&C, an administrator to over $100 billion in hedge fund capital. In addition to back-office processing, SS&C has a well established track record as a technology vendor, manufacturing CAMRA, a high-end portfolio-accounting software system popular for traditional asset management.

“Name recognition,” as well as in-house technology, was the upside to joining SS&C, says Jacobs, a business-development veteran who spent more than a decade working for Wilmington, Del.-headquartered third-party administrator PFPC.

Size, to Jacobs, is advantageous. Pointing out that SS&C has 400 people employed around the world, Jacobs notes, “we’re one of the biggest.”

At the other end of the spectrum is upstart Variman. The hedge-fund administrator, located just a quick train ride from New York in the upscale enclave of Short Hills, N.J., launched in 2005. Business development director Mary Ann Di Anna worked in foreign exchange for Chemical Bank and Sovereign Bank before making a career change. People like Di Anna—talented but, prior to Variman, inexperienced in the back office—are more-and-more taking up the challenge of working in the fast-growing field of hedge fund administration.

“Whenever I get out to network, I do tend to see the same people,” Di Anna says, conceding that might change in 2009.

The HFN Q4 2008 Hedge Fund Administrator Survey totaled $2.236 trillion in single-manager hedge fund capital under administration. With the HFN Hedge Fund Aggregate Average recording a 15.68% loss for 2008, administration—including asset valuation, custody, performance measurement, portfolio accounting and shareholder accounting—is perhaps the facet of the hedge fund industry where asset inflow, rather than outflow, is the norm. In 2009, hedge fund administration is big business, and big business is a magnet for talent.

“I’m surprised at how many people are going into the business,” admits Jacobs, who is based out of New York.

At $100 billion, SS&C is ranked eighth on the survey, while Variman, who did not participate in the survey, has raked in $2 billion since its inception. The Citco Group, with $375 billion under administration, is still the leader on the survey. State Street Corp., Goldman Sachs, Citi and The Bank of New York Mellon round out the top five largest.

Jacobs calls the arrival of Wall Street on the scene an unmistakable sign that hedge fund administration was a bona fide moneymaker.

“You have to ask,” says Jacobs. “‘When did the institutional side become interested in this? When did Citi, JPMorgan Chase, State Street Corp., buy in to hedge fund administration?’”

It started in 2002.

That year, the Bisys Group, the Columbus, Ohio-based third party administrator and at $500 billion a leading back office provider to the mutual fund industry, bought $50 billion hedge fund administrator Hemisphere Management for $130 million. State Street Corp. followed. The Boston-headquartered mutual fund administrator and global-custody provider bought $35 billion hedge fund administrator International Fund Service. Today, State Street has a $242 billion hedge-fund administration business, No. 2 behind Citco.

 

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