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Is there still a place for the
BOUTIQUE FUND
ADMINISTRATOR?
In the fund administration world, the big are getting bigger,
meaning the largest players have more assets, technology
investment and economies of scale, so is there still a role
to play for the boutique provider? Asks Charles Gubert.
S
calability is integral to a low-margin
business like fund administration.
The model worked well pre-crisis
when fund manager launch activity –
along with their returns – was healthy.
But in an environment where start-up
or early stage managers are finding it
increasingly difficult and costly to com-
pete and existing investment firms are
struggling to deliver performance, fund
administrators are under extraordinary
pressure. In response, many of these
embattled service providers feel there is
little option but to embrace consolidation.
The proof is in the pudding. Between
2006 and 2015, there were 27 hedge fund
administrator acquisitions. In the 18
months between January 2017 and June
2018, there were 28. With size allegedly
more important than ever in fund admin-
istration circles, some experts believe the
days of boutiques are largely numbered.
Moreover, fund administration is now a
business that is overwhelmingly domi-
nated by banks, large independent outfits
and private equity-backed ventures. In
this climate, is there still room for bou-
tiques to actually succeed?
60
Global Custodian
Spring 2020
The leaders dominate
M&A in fund administration has meant
the hegemonic providers are now getting
bigger. Apex Group – now owned by
private equity company Genstar Capital
– has seen its assets under administration
(AUA) balloon after going on a buying
spree, which saw it procure the likes of
Deutsche Bank’s alternative investment
fund services arm, Ipes, Atlantic Fund
Services and MM Warburg to name but a
few. Serial acquirer SS&C has continued
to enlarge its business through M&A, hav-
ing successfully completed over 50 deals
since its inception, its chief executive Bill
Stone, told Global Custodian last year.
M&A is being driven by a number of
factors. Primarily, administrators want
to obtain economies of scale but also
diversification. For many, the days of
administrator revenues being entirely
dependent on a single asset class are
coming to an end. Instead, administrators
– who may have only previously serviced
hedge funds or long-only managers are
now looking to support private capital
products such as private equity, private
debt, loan funds, real estate and aircraft