Butterfield Fulcrum, an alternative fund administration company, has tapped into investor demand for segregated and secure accounts by launching Altinus, an independent, managed accounts platform that provides segregated and comingled managed accounts with a common set of tools for operations, administration and risk monitoring. The platform is a first for a fund administrator.
The past decade has been a purple patch for the alternative asset investment industry, with high net worth individuals, institutional investors and pension funds piling into the sector. Their enthusiasm was matched with positive returns until 2008. In that year, the HFR fund of funds composite index fell 21.2%. As returns dropped and assets under management plummeted, investors tried to withdraw what was left of their cash. Unfortunately they were met with gated accounts or suspended redemptions as hedge fund managers tried to keep hold of capital.
Consequently, many investors demanded change in the industry. In 2009, Union Bancaire Prive, one of the world’s largest alternative asset investor, threatened to redeem holdings from its hedge fund managers unless transparency and due diligence increased by using third-party administrators and custodians.
In a response to gated accounts and low liquidity in times of crisis, many asset managers – such as Socit Gnrale/Lyxor and Deutsche Bank/EIM have launched managed accounts – segregated portfolios run by hedge fund managers, but with greater transparency and liquidity, allowing investors greater security when investing in hedge funds.
Separately managed account platforms are not a new phenomenon, having existed for 10 years. However, in 2009 only 2% of assets in hedge funds used this method of investment. Today, hedge fund administrators are getting in on the act.
Altinus is the first ever administrator sponsored managed accounts platform, and is based on 10 years of managed account operations experience, said Akshaya Bhargava, Butterfield Fulcrum’s CEO. It is designed to eliminate service and fee duplication by allowing allocators to determine investment allocation, while enhancing their portfolio management through robust, daily operational and risk monitoring and leading-edge analytical tools.
According to the press release accompanying the announcement: “The independence and neutrality of the platform will appeal to a wide range of Allocators and Managers whose requirements are currently not being met by the market.”
Butterfield Fulcrum was assisted by MAG Consultancy on the design and build aspects of the platform. Considering the large number of asset allocators looking to utilize Managed Accounts as a method of resolving the governance issues that were so harshly exposed during 2008, it has become increasingly clear that the Administrators are very well placed to be the sponsors of a new breed of more efficient Managed Account Platform, said John Godden, Managing Partner at MAG Consultancy. We are delighted to be associated with the Altinus Platform and see it as moving the game on significantly with its marriage of leading-edge technology, institutional quality governance and real independence.
Butterfield Fulcrum has also employed Goldman Sachs, Morgan Stanley, Newedge and UBS as prime brokers for the platform.
We have listened to our client base of over 700 funds and invested considerably in a platform that addresses what we believe to be a long-term structural change in the industry, said Jill Considine, Butterfield Fulcrums Chairman. We believe Altinus will transform the way both allocators and managers are able to access managed accounts.