The trend towards convergence of hedge funds with traditional long only funds is leading to significant opportunities in fund administration, according to Keith Hale, global head of Transfer Agency at Multifonds.
For Multifonds, this convergence trend is one of the key drivers behind the increase in revenue in its transfer agency division by 50% in the last two years.
There is convergence of fund structure with retail investors looking for absolute return funds and institutional investor allocating more funds to alternative structures, says Hale. Therefore hedge funds are gaining more long only characteristics and mutual funds are increasingly incorporating performance fees and equalization for example. The reduced cost of ownership, as well as consistent reporting and operational efficiency from a single platform across fund types enables fund administrators to better support this trend.
Noting the recent investment program announced by BNP Paribas to upgrade its hedge fund and fund of hedge fund administration services, Hale says this is a sign that administrators are converging towards single platforms that can provide greater efficiency and scalability. Hale says the convergence of fund types and the integration of fund data onto a common platform is a key trend in terms of servicing those funds.
Hale said he expects that ongoing consolidation to continue in the asset manager and administrator space. In addition, administrators will have to deal with the swathe of regulation, such as FATCA, where they will be required to make significant software changes to comply. For those with in-house systems they will have to fund the cost of all the changes themselves, as opposed to vendors clients sharing in the cost of development.
Multifonds has invested over 20 man-years in alternative investor services processing to date.
(JDC)