Citco Sells Hedge Fund Custody Business to Clearstream

Citco is selling Cork-based financial institution hedge fund custody processing business to Clearstream.
By Janet Du Chenne(59204)
Citco is selling Cork-based financial institution hedge fund custody processing business to Clearstream.

The transaction, which has a value in the “mid double digit million euro range”, allows Clearstream to significantly expand its hedge fund services for financial institutions whilst enabling Citco to strategically focus on its core fund investor client base – namely fund of hedge funds, family offices, insurance companies and pension and endowment schemes – via its Citco Alternative Investor Services (CAIS) division.

The acquisition of Citco Global Securities Services’ (CGSS) hedge fund custody infrastructure adds around 300 CGSS employees based in Cork to Clearstream and licences Clearstream to use Citco’s custody IT infrastructure.

Commenting on the background to the deal, Philippe Seyll, member of the Executive Board and head of Investment Funds Services at Clearstream, says the acquisition of Citco Global Securities Services (CGSS) allows the company to offer financial institution clients the opportunity to combine Citco’s capabilities in the alternative sector, together with Clearstream’s operational expertise in plain vanilla funds, for a true one-stop-shop fund processing product for all types of funds.

“The two companies already enjoyed a good relationship and when Clearstream opened up its branch in Dublin in November 2012 the discussion on how to join forces intensified,” he adds. “Hence the leading provider of hedge funds custody services for financial institutions and the largest cross-border plain vanilla funds processing platform globally came together.”

William Keunen, global head of Citco’s Asset Servicing business comments: “For Citco this has been a piece of our business that we’ve considered somewhat separately because by its nature it purely entails providing custody services for financial institutional clients; in selling our platform and capabilities to Clearstream, we felt that they could bring these clients very compelling synergies by offering them custody services across both mutual funds and hedge funds. This enables us to focus on our core strategy which is asset servicing across the alternative space, providing services such as fund administration, financial reporting, middle office services, regulatory compliance and reporting—and custody, to fund of fund, family office and other institutional clients that invest in the alternative sector.

“We are seeing more opportunities across all alternative asset classes such as private equity, real estate as well as hedge funds and we continue to invest in expertise at a global level and as such we’re adding offices in the Far East, the Middle East, Europe (we just established an office in Guernsey to service a new client).

Citco will continue to provide custody services to fund of fund clients, along with administration and other financial and reporting services.

Commenting on synergies to be gained from the acquisition, Seyll says the objective is to provide financial institutions with an automated and standardized process for all their fund transactions – from mutual funds to hedge funds—by using the same platform and connectivity media. “Most of the clients that are using the services of the company we acquire from Citco do so far not use the services of Clearstream’s investment fund services,” he says. “We aim to enlarge business volumes on our Vestima fund processing platform, largely as a result of cross-selling synergies of the new hedge funds services to traditional mutual fund clients and our mutual funds services to new financial institutions traditionally investing into hedge funds.”

The Vestima platform is currently available in 73 countries and has around 1,000 customers.

The transaction is expected to close in September.

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