LaCrosse Global Fund Services is to buy Bank of America Merrill Lynchs $6 billion fund administration business, creating a firm with over $21 billion under assets.
According to LaCrosse Global Fund Services Co-Chief Executive Officer Christopher Kundro: They were very distress orientated, which is certainly in our sweet spot and where we wanted to continue to grow our asset base. At the same time, we did get some new capabilities in particular around UCITS and funds of funds, because we are acquiring not only the people but also the legal entities in Jersey and Dublin as well.
Newcits, or hedge funds that comply with UCITS guidelines, have animated a fund industry facing difficult financial conditions. Brevan Howard, MAN Group and GLG Partners have launched UCITS hedge funds over the past year, and according to KdK Asset Management, 80% of established fund of hedge fund providers intend to launch some form of UCITS-investing vehicle over 2010.
The deal is subject to regulatory approval, but the migration of clients to LaCrosses platform should face few problems as both administrators use Advent Geneva, a portfolio management, investor servicing, operations, and accounting platform.
The move also opens up possibilities of new business for LaCrosse, as Bank of America Merrill Lynch continues to provide prime brokerage, custody, trust, escrow, cash management and agency services to hedge fund clients.
The acquisition also moves LaCrosse into the mid-sized range for hedge fund administrators. I think many investors out there are looking for administrators that have at least $20 billion in AUM, said Kundro. The move fits us very well as we are both a boutique that can still offer clients custom service but at the same time it gives us a degree of scale that will also benefit those clients.
Consolidation in the fund administration industry has been the trend for 2009/2010. In February 2010 BNY Mellon purchased Germany’s BHF Asset Servicing for $343 million, and in 2009 State Street bought Italian banks Intesa Sanpaolo’s securities arm for 1.26 billion. Citco has entered into a strategic alliance with OpHedge, and most recently Socit Gnrale Securities Services teamed up with U.S. Bancorp Fund Services to combine fund services across the European and American markets, initially focusing on U.S. clients looking to do business in Luxembourg and Ireland.
Citco Fund Services, State Street and BNY Mellon remain the largest hedge fund administrators.