Hedge fund administrator Butterfield Fulcrum has undergone some major ownership and management changes in recent years. First Butterfield Fund Services and Fulcrum Group merged in 2008 to create Butterfield Fulcrum Group, with Fulcrum executives Glenn Henderson (CEO) and Tim Calveley (CFO) quickly stepping down to be replaced by Akshaya Bhargava as CEO. Last summer, Bhargava was replaced by Mike Clark, former CEO of J.P. Morgan Worldwide Securities Services and more recently head of Fidelitys institutional services business. Then last week, news emerged that private equity firm 3i as well as Butterfield Bank, both of which owned stakes in the fund administrator, were selling their shares. Clark is now out, and Henderson and Calveley, backed by BV Investment Partners, are back at the helm as BFGs new owners.
In this exclusive interview with Global Custodian, Glenn Henderson, Tim Calveley and Chris Mulhern, who has been COO of Butterfield Fulcrum through the aforementioned structural changes, discuss the acquisition in detail.
Click here to watch the interviews on GCTV.
Glenn Henderson, CEO, Butterfield Fulcrum
GC: While ownership changes are fairly common among hedge fund administrators, Butterfield Fulcrum has certainly had its fair share over the past several years. Can you outline the structural and ownership changes the firm has undergone in recent years?
GH: There [have] been ownership changes in Butterfield Fulcrum over the last few years. Its interesting that although theres been changes to the ownership and the structure one thing that has remained quite constant in Butterfield Fulcrum is the senior management of the company. Tim Calveley, who used to be CEO of Butterfield Fulcrum, and myself, I used to be CEO of Fulcrum Limited, were rejoining the senior management team of Butterfield Fulcrum. So although theres a change of ownership over the last few years, what were very excited about is there really has been a fairly constant presence of a senior management team through all the different ownerships of Butterfield Fulcrum over the last few years.
One of the constants in the ownership as well is myself. Ive been a shareholder of Fulcrum, and when we did the merger of Butterfield Fulcrum I remained a shareholder throughout the life of Butterfield Fulcrum and now obviously Ive come back with Tim and with BV Investment Partners to take complete ownership of the company. So were here today with some changes but a lot of things remain quite the same in terms of the senior management of the company.
GC: Can you explain the new structure of BFG, from the management to the owners to FORS and how it fits in with that company?
GH: The current structure of Butterfield Fulcrum Group, the new parent company will own both Butterfield Fulcrum, the hedge fund administration business, and FORS Limited, also out of Bermuda, which is a family office reporting solutions business. They will operate really as two sister companies, one Butterfield Fulcrum [continuing] to do as it does on a day-to-day basis with the current management team servicing the hedge fund industry, private equity and various other alternative investment structures. FORS will continue to operate under the leadership of Tim Calveley as CEO and the current management team as well continuing to service the family office clients that we have. Its really two companies that are remaining independent in terms of process and in terms of client delivery. Theres really no integration plans in terms of technology and its really business as usual.
Where youll see some changes and some synergy is well be able to leverage our sales presence across both companies. With FORS and with Butterfield Fulcrum its a lot of the same people in the industry we need to go visit: the auditors, the lawyers, the prime brokers, the bankers, and we believe that theres a very strong crossover opportunity to manage and market the two businesses together.
Tim Calveley, CEO, FORS Limited
GC: What prompted you to acquire Butterfield Fulcrum?
TC: One of the reasons we were very keen to get involved back in the business, there [were] probably four main reasons. Theres a very strong management team who weve worked with for a very long time; extremely solid client base and technology platform of the underlying business; the integration with FORS, very synergistic and tremendous value-add to the business as well; and finally the timing obviously the growth, pickup in the hedge fund market again since Q3/Q4 2010, again it was a great time to be entering the business. So again, those four factors combined made it a very exciting time for us to get back into the business and really kind of drove our commitment to get it done.
GC: Did you envisage several years ago when you were last at Butterfield Fulcrum that you would essentially buy the company one day?
TC: We certainly never envisaged or planned to jump back in and become owners of BFG. Glenn Henderson and myself were senior executives running Fulcrum Limited from the mid-2000s to 2008. It was Glenn and I who conceived of the idea of bringing Fulcrum Group together with Butterfield Fund Services to create the Butterfield Fulcrum Group merger in 2008. We left the company at the end of 2008 and left to acquire FORS Limited, which is family office accounting and reporting solutions. However, we both remained shareholders of BFG and a lot of the senior management of BFG were very good friends of ours and we worked with them for many, many years 10-15 years. So we kind of kept a close eye on what was happening with BFG and what was going on. And probably around about October or November of last year we started some discussions with Bank of Butterfield and with 3i, the previous owners of BFG, and we realized there was an opportunity for us to step back in and acquire the entity in full. We spent 3 or 4 months negotiating a very busy Christmas and New Year! and finally last week we signed the transaction with our investment partners, Boston Ventures.
GC: What initiatives do you have in the short term, and what are you planning in the long term?
TC: The short-term initiative is to get back to what we were doing at Fulcrum. The reason Fulcrum was so successful is we were concentrated solely on client services. Thats all that really mattered. We focused purely on the clients, on the core hedge fund and private equity alternative fund administration technology and products aimed at those clients and those markets. Really what were planning on doing with Butterfield Fulcrum Group going forward is really getting back to basics. Getting back to concentrating on core clients and key staff.
Chris Mulhern, COO of Butterfield Fulcrum
GC: What changes will the client see as a result of the new ownership and management?
CM: I think this change in ownership compared to the Butterfield-Fulcrum merger, which I think had a high impact on the clients, this ownership change really has no impact on our clients. There will be no change in the technology being used, the processes being employed, the client-facing staff on each account. No changes whatsoever. The only change really comes at the top, at the most senior management level, and to be quite honest those are quite positive changes. The senior management team in place at Butterfield Fulcrum today is well versed and well acquainted with the new ownership and new management. I think that will do nothing but play positive for the overall client base. But directly to the clients, no changes, no changes like I said in anything that they see coming from us in terms of client delivery.
GC: What is the state of the industry today, and in that context what are the prospects for BFG?
CM: The state of the hedge fund industry itself is very positive, especially in comparison obviously to a year or two ago. The crisis is over, capital is returning maybe even at a higher pace than people expected. The managers are performing better, [better] performances coming back, people are re-achieving their high watermarks and even in Quarter 4 arguably might be the strongest in terms of capital return to the industry in 2010 than any quarter in history. So things are very positive for the hedge fund space. In my opinion there are some that would argue it hasnt quite reached the strength level it was at. But from what we can tell, from what we can see at our client base, very positive, returns are up, capital keeps coming in and its great to be a fund administrator in that environment.
GC: I know you are shuttering the Altinus platform. Why have you decided to close this part of your business, and what will happen to your clients who use Altinus?
CM: Indeed in 2010 Butterfield Fulcrum created and built a managed account platform more of a quasi-managed account platform dealing with legal setups, back office, middle office work, risk reporting from managed accounts. It wasnt a true managed account platform in that there was no investor selection. With the new ownership coming in with Butterfield Fulcrum, the focus is not going to be on managed accounts, and we will not be continuing with Altinus. It never truly launched so there are no clients on it. Our focus needs to be on fund administration and our fund administration clients. The reason we wont continue on with the Altinus platform is, number one, we dont want to compete with our current clients, [and] number two, we dont want to try to penetrate a sector within the alternative asset space that already has plenty of players and plenty of strength within it, and really truly is not our specialty or our strength.
Christopher Gohlke