Opus Fund Services has acquired the fund administration unit of San Francisco-based Agile Hedge Solutions, further consolidating the boutique hedge fund administration space.
Stephen Giannone, president of Opus Fund Services, confirmed to Global Custodian that Agiles US West Coast client base and operations were what attracted Opus to the administrator. While he would not divulge either firms assets under administration, he said the combined groups would service more than $4 billion in assets.
Opus, which earned high marks in Global Custodians latest Hedge Fund Administration Survey, represents one of the dozens of independent fund administrators competing for hedge fund clients, who historically have been drawn to the biggest (Citco) and bank-owned (Citi, State Street, BNY Mellon, Goldman Sachs) administrators. It is suggested that the top ten fund administrators by size service as much at 80-85% of the $2 trillion-plus in global hedge fund assets, while the remaining 15-20% of assets are shared by the industrys approximately 200 other administrators. [See “A rising tide for fund administrators,” Global Custodian, Spring 2011.]
The saturation of the boutique hedge fund administration space that is, the proliferation of smaller, independent administrators has resulted in a great deal of consolidation over the past decade. Mergers and acquisitions have become particularly heightened in the wake of the financial crisis, which slashed hedge fund asset values and, as a result, assets under administration and profits for administrators. That has led to a mentality among some administrators that they must buy out rivals to gain market share or else wind up on the auction block.
Giannone says Opus is looking to buy, not sell. Opus is interested and is currently pursuing additional acquisitions that make strategic sense, both from a geographic and also AuM perspectives, he says. The administrator plans to expand its footprint in the US while entering the European market by 2013, Giannone adds.
In recent years, M&A activity among administrators on the smaller side has included Butterfield Fund Services and Fulcrum Group merging to become Butterfield Fulcrum; Equinoxe Alternative Investment Services buying MadisonGrey; TMF Group buying Kingsway Taitz Fund Administration; and so on. (In the past decade, M&As on the larger end of the scale have not been uncommon either. HSBC bought Bank of Bermuda in 2004; Citi bought Bisys in 2006; the now-defunct Fortis bought Hedge Fund Services in 2006; Deutsche Bank bought HedgeWorks in 2008; and State Street bought Mourant in 2009.)
Some boutique administrators have thrived in current market conditions by carving out a niche for themselves and focusing on particular markets or asset classes. While Opus services a variety of asset classesI think that you need to focus on most if not all asset classes and service them in a seamless way. I dont think you can specialize in any one asset class and have a robust client base over the long term, Giannone saysit primarily does business with funds domiciled in Bermuda and the United States, most of which have less than $100 million in assets.
In our survey, Opus is top rated in the United States and received an almost perfect score in Bermuda. It also has offices in Chicago and Naperville in Illinois as well as San Francisco.
Agile will continue to offer its primary business of outsourced CFO services. Nicholas Castoria, president of Agile, and his team will work together with Opus as consultants in conjunction with the acquisition.
“This acquisition is the result of many months of hard work by both parties, says Robin Bedford, CEO of Opus. We are excited to have the opportunity to work with the Agile client base as they become part of the award winning Opus platform.
Greg Knapp, who heads the San Francisco office of Opus, adds: “We are excited to continue the rapid growth of our West Coast presence with this transaction. The expansion of our San Francisco office is one of our core strategies, and shows the importance that Opus has placed on the West Coast marketplace.
Christopher Gohlke