A recent survey by Preqin found that fund managers often change service providers, particularly administrators and prime brokers, mainly due to dissatisfaction with quality and high costs.
The survey, which polled over 100 fund mangers globally, found that over the last 12 months, 33% of managers have changed service providers, and over the five years before that, 41% have made a change. 55% made a change over the last year due to dissatisfaction with quality of service, and 39% made a change due to cost concerns. During the five years prior to that, 61% changed due to dissatisfaction with service and 42% changed because of costs.
Regionally, costs are less of a concern in North America, as only 23% changed because of this factor, compared to 59% in Europe and 71% in the rest of the world. North American managers had the unique factor of growth in AuM causing a change for 38% of managers; this was not an issue at all for managers in the rest of the world.
Overall, over the last 12 months, North American and European fund managers changed providers the most, with 35% doing so. But over a longer period of time, the five years prior excluding the last 12 months, European managers changed providers the least, with 30% making a switch. During that time, 45% of North American managers changed providers. In the rest of the world, 27% changed providers over the last 12 months, but over the five years prior to that, these managers changed providers the most at 55%.
As for the type of service provider, 56% changed their fund administrator over the last 12 months, and during the five years prior to that, 60% made a change. Prime brokers were also frequent change targets, with 53% of managers switching prime brokers over the past 12 months and 54% doing so during the five years prior. European managers changed prime brokers the most frequently during the past five years, with 61% doing so, while 48% did so in North America and 25% did so in the rest of the world. As for fund administrators, 52% of North American managers changed these providers during this time, 56% of European managers did the same, and the rest of the world changed far more frequently, with 75% doing so.
However, far fewer managers changed their custodians or auditors. Over the past 12 months, 22% changed their custodian and 19% changed their auditor. In the five years before that, 20% changed their custodian and 26% changed their auditor. Regionally, only 14% of North American mangers changed their custodians over the past five years, while 22% did so in Europe and 25% did so in the rest of the world. Outside of North America and Europe, virtually no managers changed their auditors over the last five years, while 24% did so in North America, and 28% did so in Europe.
Hedge Funds Change Service Providers Due to Quality and Cost Concerns
A recent survey by Preqin found that fund managers often change service providers, particularly administrators and prime brokers, mainly due to dissatisfaction with quality and high costs.