[ I N D E P T H | I N D E P E N D E N T A D M I N I S T R A T O R S ]
exist in Europe ,” explains Doug Hart , CEO of Alter Domus . “ In Europe , the independent model has developed over the last 10 to 15 years and we have been able to capture a lot of market share against some groups which used to be best-in-breed . “ Private market managers really view Alter Domus as having the right kind of expertise , which is very narrow but very deep – as this is all we really do . Our technology offering is strong and our people offering is even stronger and put the two together very well .”
Merger , she wrote With the number of providers ballooning , those at the top of the field had to adapt and scale in order to stay there . The first way to achieve that is through organic growth – expanding product services and geographical reach to pull in new business – which the top players have all done successfully . The success in the alternatives space has been a key enabler for that organic growth , with a fresh crop of clientele up for grabs , as Declan Quilligan , head of hedge fund services at Citco , explains . “ There ’ s been no acquisitions along the way [ for Citco ]; it has been a story of pure growth . Hedge funds were certainly growing while the whole private assets industry gathered momentum . Then came this massive opportunity in respect of private equity and real estate , for example . Even if I look today , both are at earlier stages of the cycle than the hedge fund industry would be .” Another way to achieve scale is , of course , mergers and acquisitions . M & A activity has been synonymous with the fund administration industry in recent years , in a trend that seems to be continuously accelerating . Deals in the sector have been on a continuous upward trend in recent years , rising from 11 in 2019 , to 13 in 2020 , to 22 in 2021 , according to Fund Recs . Apex Group has been the most visible in this aspect , completing an impressive
“ It ’ s the data play that ’ s really pushing and distinguishing providers .”
BILL SALUS , CO-FOUNDER AND MANAGING PARTNER OF PADDOCK CAPITAL MARKETS
31 acquisitions in the last five years alone . But the acquisitions are not a scale play , says Mulhern : “ Our M & A has been to add strength to our business through additional geographies , providing our clients on-the-ground support no matter where they are in the world , or through expanding our service capabilities and bolstering our expert knowledge and inhouse talent across different asset classes . “ Our acquisitions don ’ t just add scale to our business , they are carefully integrated into the group and add the technologies , services , people and footprint . Of course , scale is a benefit , but it ' s not the driver or the ethos behind why we acquire certain companies .” While some see acquisitions as an enabler for growth , others suggest that considerable activity can act as a hindrance . “ Knitting together organisations , knitting together technologies can be a distraction ,” considers Quilligan . “ What we term as the Citco way is organic growth , keep things simple , grow via our people , via our technology , via our expertise , and not really concerning ourselves with everything that comes with acquisitions . “ As we observe the industry over time , it has been a distraction to many of our peers . Having the luxury of not having to deal with that has been very positive for us from a security standpoint .” Despite the potential speedbumps that acquisitions create , it ’ s clear that M & A does work as an effective tool in scaling a business and providing a springboard for further organic growth down the line . Activity in the sector is at an all-time high , with new entrants to the market seemingly on a daily basis . In markets such as this one , acquisitions are inevitable and will certainly continue for the foreseeable future .
Invest or die Tech is the new battleground in the fund administration space . With competition for business as fierce as it currently is , fresh impetus or improved operational efficiencies can be a key differentiator for fund managers in the decision-making process . It wasn ’ t too long ago that technology in the space really only came down to your accounting functions – but now that is part of a much wider tech stack . Funds managers scrupulously assess a prospective provider ’ s services and functionalities – and if it ’ s not up to scratch , they will quite simply look elsewhere . “ Investing in technology is just absolutely critical ,” asserts Quilligan . We quite simply would not have a business if we are not investing . Advance the industry , looking at practical solutions that will benefit our clients and the investors of the funds .” Apex ’ s Mulhern agrees that investment in technology is crucial , and predicts that technology will move and change more in the next four years than it has in the last 30-40 years . “ Technology is inextricably linked with our ability to innovate ,” he says . “ Our focus is not just about the present in terms of how we view technology and what we need to do , it ’ s trying to look forward and be ready for that pace of change – which we believe is going to be extreme versus the pace of change in
“ Managers are now viewing us as a partner , an extension of themselves to a much larger degree ; and that is the biggest opportunity and the biggest challenge that we have .”
DOUG HART , CHIEF EXECUTIVE , ALTER DOMUS
42 Global Custodian Fund Services Annual 2022