[ N E W S R E V I E W | F U N D A D M I N I S T R A T I O N ]
SS & C ’ s Bill Stone
Global Custodian sits down with the founder and CEO of SS & C , Bill Stone , to discuss the origins of the company and the development of the fund administration industry .
Could you give us a background of the business and how the success of the fund administration side came to fruition ? I founded this company in 1986 and we were primarily a financial technology player . We had built software and bought a few companies around 1999- 2003 , including Total Return , which was a hedge fund accounting system and AdvisorWare , which was owned by HedgeWare . We had a lot of hedge funds as clients for software , but we realised in 2002 that , wow , we ’ re selling software at $ 50,000 a year and these guys are building businesses making hundreds of thousands . So why don ’ t we try that ? We weren ’ t intimidated by the accounting and reporting processes because we were pretty familiar with it and had built our own software . What really happened was , this became an accounting and systems business . Fund administration used to be mainly finance , prime brokerage and all kinds of other things that commercial and investment banks would supply to these hedge funds . Often , they wouldn ’ t have alternatives to other funding sources or other ways to execute their strategies . That proliferated and in 2002 , when we started , we weren ’ t doing any assets under administration . Now we are a leading administrator with $ 2.23 trillion in assets under administration at the end of Q1 2022 . So obviously , it ’ s been pretty successful .
We continued to grow , made more acquisitions – purchasing the likes of CACEIS ’ and Wells Fargo ’ s fund administration businesses , Citi ’ s Alternative Investor Services business , and GlobeOP – and got to the trillion dollar club around 2016 . We still make acquisitions , but obviously , a lot of people figured out that SS & C has a pretty good model , so others have been getting into this acquisition game . We still look and make some bids , but we ’ re a very disciplined company . We ensure our clients know we will be here ; we ’ re very profitable and use technology to extend our gains . An awful lot of the platforms in hedge funds use SS & C as their fund administrator because they know they can scale . Some of our clients might do 1-2 million trades a day . Not many fund administrators can handle that . Hedge fund managers like to know we ’ re accountants and systems people and spend tons of money on cybersecurity . We probably spend $ 500 million yearly on R & D . We have about 20,000 clients who manage around $ 45 trillion , so there are not many asset classes or parts of the globe we don ’ t touch . We ’ re large scale , with about 27,000 people and offices in 40 countries , with an awful lot of talent and capability , but also patience . We have the discipline to walk away . We can still buy and can afford it and outspend anybody and I would think we ’ re somewhat by far the most profitable fund administrator . It ’ s because our people , processes and technologies are better . And when they ’ re better , you really don ’ t have to think about it that long , you do it . Doing it is way more cost effective than thinking about it . Because you ’ re paying people every day , whether you ’ re doing it or thinking about it . Doing it generally gets you some revenue ; thinking about it generally gets you more expense .
Was there a particular point that you recognised technology could be a real differentiator in the industry ? In 1986 , the world was getting a little too complex for pencil and pad , so we had to get away from working column worksheets . People were coming out with things like Lotus 123 , and then obviously Microsoft took over with Excel as far as the spreadsheet game was concerned . But I ’ m an old auditor , so controls and change controls and being able to audit the spreadsheet , who built what macro and how well documented it is , and if somebody leaves , who ’ s going be able to pick that multi macro spreadsheet up with hidden cells and formulas . That becomes pretty risky for people who want to trade every day and understand their positions and values . I thought technology was going to be the next big wave . The IBM PC came out in 1981 , and I started this in 1986 . You started getting a Pentium chip in about 1988 . Then pretty soon , you had PCs that were as powerful
48 Global Custodian Fund Services Annual 2022