Carbon360 Research has released its second annual 2007 Carbon360 Fund Administrator Service Provider Fact Book.
Findings illustrate that overall industry growth remains strong, despite the fact that costs of services, technology and people have risen sharply. The Carbon360 Report illustrates that previously reported Hedge Fund industry assets under management have been grossly underestimated.
Analysis has shown that approximately ten percent of existing hedge fund managers are self-administered. Self-administered hedge fund managers control between 25-30 percent of all hedge fund assets; inclusion of the self-administered hedge funds’ previously ‘untracked assets,’ places the total level of real Hedge Fund industry assets between $3.4 and $3.5 Trillion as of the end of the first quarter 2007.
However, Hedge Fund and Fund of Fund administration revenues were expected to grow from $2.77 Billion FYE 2005 to $3.14 Billion FYE 2006. Carbon360˚ found that in fact, overall Gross Operating Margins declined over the two year period from 2004 through 2006. Projected gross profit for the industry FYE 2006 was $639 Million an increase of 10 percent from $580.5 Million FYE 2005. This represents a significant decline in the rate of profit growth, which had been up nearly 70 percent from 2004 to 2005 fiscal year ends.
“The fund administrators, must either allocate greater percentage of their revenue increase into research and development, or divest themselves of the IT responsibility through strategic partnership with software vendors,” observed Brian Shapiro.