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leasing. Many of these illiquid investment
strategies have seen their AuMs increase
exponentially, and this is generating
interest from administrators.
Data from eVestment found private
equity and private debt AUA soared to
$3 trillion in 2019 while 17 out of the 21
administrators surveyed had an average
year-on-year growth of 11%. While large
independent administrators can buy
out competition by virtue of their own
wealthy private equity backers or by
tapping into debt capital markets, a lot of
leading banks have shunned M&A alto-
gether in favour of simply investing their
own cash into diversifying their business-
es. Banks including HSBC, JP Morgan,
BBH, BNP Paribas, BNY Mellon and State
Street are all enhancing their private asset
capabilities.
In a market where scale and diversifica-
tion are essential USPs, boutiques appear
to be on the ropes. “Large fund adminis-
trators have three main strategic advan-
tages over boutiques. Generally speaking,
they tend to have superior technology as
they can afford to,” says Peter Northcott,
director at KB Associates, a fund consul-
tancy. “Secondly, investors are naturally
favourable towards administrators who
they know. Some of the smaller admin-
istrators – especially in Europe – do not
have much brand recognition in the US.
And finally, the large providers are more
likely to have broader expertise looking
after different asset classes.”
Furthermore, bank-owned adminis-
trators can also potentially offer cost
synergies to asset management clients.
“Bank-operated fund administrators can
provide a wider range of services to fund
managers beyond just administration but
also custody and investment banking.
This can obviously help managers obtain
wider efficiencies,” says Robert Mirsky,
head of the asset management group and
head of the London office at EisnerAmp-
ner.
Room still for boutiques
Gavan McGuire, partner and head of
business development at Centaur, argues
A D M I N I S T R AT I O N ]
profitability does not necessarily corre-
late with AUA size. “A fund administrator
with a $50 billion AUA could be quite
profitable especially if they are charging
on a fixed fee basis and have a good client
base. Simultaneously, an administrator
with $200 billion might have smaller
margins if they have more clients who are
not revenue generating,” he comments.
Elsewhere, McGuire adds administra-
tors should not pursue acquisitions just
to grow their AUA. “This can be a false
economy , especially if there are poor
synergies or legacy issues,” he adds.
McGuire accepts that M&A can be
“Bank-operated fund administrators can provide a
wider range of services to fund managers beyond just
administration but also custody.”
ROBERT MIRSKY, HEAD OF THE ASSET MANAGEMENT GROUP AND
HEAD OF THE LONDON OFFICE, EISNERAMPNER
62
Global Custodian
Spring 2020
positive if it allows administrators to
branch out beyond their traditional asset
classes or provide new services such as
depositary, custody, or regulatory sup-
port. “While we are of course focused on
growth, it is not growth at all costs. We
support managers operating open ended
and closed ended funds, but we do not
add clients purely for the sake of bigger
numbers. The client needs to be the
correct fit. Our USP is that we are a fund
administrator and we focus on our core
services,” continues McGuire.
Boutiques often pride themselves on
delivering superior client service. “It
is broadly accepted that a boutique or
owner-managed administrator will be
more engaged with their clients than a
larger organisation. In particular, smaller
asset managers – who might not get much
airtime from large providers - might be
better served by a boutique administrator.
However, the larger market participants