The Global Custodian Hedge Fund Administration Survey 2009
The 2009 Global Custodian Hedge Fund Administration Survey 2009 took place in the middle of the most tumultuous period the industry has undergone since the survey was first conducted in 1995.
The rescue of Bear Stearns, followed by the collapse of Lehman Brothers, not only made it immensely difficult for hedge fund managers to access financing, but also obliged them to respond to investor concerns about counter-party credit risk and the safety of assets in custody with prime brokers.
So it is not surprising that one of the key findings of the 2009 survey is the increased pressure on hedge fund administrators to deliver more and more up to date information about positions, portfolios and performance. Nor is it surprising that hedge fund managers are looking to their administrators to help them manage the challenge of operating with multiple prime brokers and third party custodians, by extending their services into the middle office.
The increased level of interest in the potentialities of the administrative function were evident in an increased rate of response to the survey, even in a year when a mixture of redemptions, falling asset value and fund closures have reduced assets under management by between a quarter and two fifths. Authenticated responses were up 14% from 2008-despite the smaller hedge fund universe- at 1,370 responses in all.
Citco remains the dominant player in the top tier of the industry, in terms of both scores and responses, but the growing number of providers owned by major custodian banks in the top ten by scores is indicative of the value hedge fund managers increasingly attach to large balance sheets, both from an asset safety point of view and from their potential to offer access to a broader range of services- including the securities financing and lending services that were once the preserve of the prime brokers.
Of the major prime brokers, only Goldman Sachs continues to shine in hedge fund administration. Deutsche Bank, which boosted its presence in hedge fund administration with the acquisition of California-based administrator Hedgeworks in January 2009, is a particularly interesting newcomer to the ranks of leading players, because it is both a major prime broker and a sizeable custodian. SS&C also makes its debut as a rated provider with an impressive set of scores.
|League Table: The Major Providers (Position last year)|
|1. Citco Fund Services (1)||6.45|
|2. Deutsche Bank Alternative Fund Services (New Entry)||6.37|
|3. SS&C Fund Services (New Entry)||6.22|
|4. PNC Global Investment Services (4)||6.22|
|5. CACEIS Investor Services (6)||6.13|
|6. Goldman Sachs Administration Services(2)||6.13|
|7. UBS Global Asset Management - Fund Services (8)||6.04|
|8. HSBC Securities Services (5)||6.04|
|9.GlobeOp Financial Services (9)||5.93|
|10. State Street Alternative Investment Services (3)||5.93|
State Street, the Boston-based global custodian, which is extending its banking services to hedge fund managers, remains a top class service provider. French custodian and fund administrator CACEIS is now also a prominent force in the survey. The acquisition of Olympia Capital in November 2007 gave CACEIS a presence on both sides of the Atlantic. Despite the wider difficulties of the bank, UBS lifted its scores in all but two service areas, and moved two places up the league table.
Against the trends of consolidation in the financial services industry, and of shrinkage in the hedge fund industry, the hedge fund administration industry sustains a large number of smaller providers, many of them founded by former employees of the major providers. To reflect the different scale and nature of their business, the survey places smaller providers into a second "peer group," and measures their performance against each other rather than the major providers.
|League Table: The Minor Providers (Position last year)|
|1. Stone Coast Fund Services (New Entry)||6.81|
|2. ISIS Fund Services (New Entry)||6.67|
|3. Prime Management (New Entry)||6.67|
|4. ATC Fund Services (2)||6.66|
|5. Equinoxe AIS (New Entry)||6.59|
|6. AIS Fund Administration (3)||6.58|
|7. Kaufman Rossin (1)||6.51|
|8. ALPS Price Meadows (New Entry)||6.47|
|9.Conifer Securities (New Entry)||6.43|
|10. Quintillion (6)||6.41|
The full results of the 2009 Global Custodian Hedge Fund Administration Survey appear in the Summer Plus issue of Global Custodian magazine or can be accessed by online subscribers here.
Full research reports are available from Muzaffar Karabaev, Director of Research at Global Custodian.
Dominic Hobson, Editor in Chief, at email@example.com or +44 (0) 207 148 4280
Allison Cayse, Surveys Editor, at firstname.lastname@example.org or +1 513 574 0220
Muzaffar Karabaev, Survey Reprints/Research Enquiries, email@example.com or +44 (0) 207 148 4289