Reviewing Hedge Fund Administration M&A 2016 Report

A report containing recently published articles on hedge fund administration argues that custodian banks will extend fund administration services to alternative fund managers and addresses several key areas of hedge fund administration including, standardization, strategy, convergence and cultural fit.

M&A Will Improve Standardization

Despite the fact that there is plenty of scope for further consolidation in the hedge fund administration space, only those with a clear strategic vision and a willingness to reinvest in their businesses will likely emerge as tomorrow’s winners. Too many independent administrators and no uniformity lead to of lack of standardization and further lowering their prices in a bid to win mandates. Due to that, smaller administrators have either gone under or been forced to merge. 

Convergence Drives Strategic Operational Partnerships

Hedge fund managers develop more private equity-like fund strategies. Fund administrator should have an ability to act as a strategic operations partner. Some of the key aspects of being a strategic operations partner as opposed to an administrator include: drive innovation, collaborative problem solving, mutual trust and solutions versus services.

Strategy Will Be to Focus on ‘Growth From The Core’

Jack McDonald, President and CEO of Conifer Financial Services, addressed three key trends emerging with respect to the acquirers. "Firstly, there are mergers between peers, similar to Conifer's merger with Vastardis Capital in 2014. Examples can be where two firms come together to leverage the strengths of each organization and add more scale to the overall operation. Secondly, there are the larger consolidators, such as SS&C and Mitsubishi. Thirdly, McDonald expects new types of acquirers will enter the marketplace," Hedgeweek reported.

Cultural Fit Is Key to Long‑Term Success

Cultural fit is an important consideration when managers select their fund administrators. "Managers should make sure that their service providers are closely aligned with their culture and mindset. You really need to act as a cohesive unit when servicing alternative funds," the report stated.

Sources: Hedgeweek - Hedge Fund Administration M&A 2016


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