Continued consolidation expected for fund admins
A recent alternative fund administration survey, carried out by eVestment, highlights continued and robust levels of M&A in the space, as well as revealing top locations for growth and ILPA template reporting moving into the mainstream.
Here is an overview of the key findings.
Continued M&A throughout 2018Activity highlights:
- Apex Group acquired nine fund administrators between Jan 1 2018 and Q1 2019
- SS&C completed purchases of software providers DST and Eze Software
- State Street completed acquisition of Charles River Systems
“We have seen significant activity from private equity investors investing in private capital service provider businesses and forming European and global players. After many banks have exited the business, we believe we will see some re-entering by creating new business units or [via] acquisitions. We believe there will be a consolidation within the next five years which will coincide with private equity houses exiting their investments in the private capital space.”- - Mid-Sized Global Fund Administrator“We anticipate further consolidation in the fund administration sector driven by increased regulatory and data management demands, growing fund sizes and [increasing] sophistication. There will also be ‘disruptive’ providers who enter the market with innovative technical solutions which reduce cost. These will compete with existing providers for parts of the value chain.”- - Global Custody Bank
- US still top destination for fund administration growth
- Interestingly, Europe remained second, despite ‘tepid economic growth and Brexit uncertainty’
- Most fund admins have a presence across the EU as well as cross-jurisdictional capabilities. Some respondents also flagged necessity for ManCo structures in the EU27, and for a presence in Luxembourg specifically.
We do not need to establish new legal entities, we already have a significant footprint and an established service offering in the EU27, and we have the licenses and permissions in place to continue serving our clients post-Brexit. In preparation for Brexit, we have built out our service capability in our EU27 operations so that we can continue serving clients in all our jurisdictions.”- - Global Custody Bank
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Compounding these trends, Apex’s reported private equity and debt AUA for YE 2018 reached $234bn, marking an increase of 2778%
For reference, Citco’s combined private equity and debt AUA came in at $250.4bn, an uptick of 11.3%. State Street reported $383.68, up 9.6%; while SEI counted a total of $327.5%, up 21.5%.
The biggest declines were reported by Maitland, which saw AUA of private equity and debt drop 72.5% to $1.89bn AUA, and O’Conner Davies Administration fell 61.5% to $0.22bn.[/su_note]
Private equity and debt funds
- ILPA template moves into mainstream: for last year’s survey, fund admins reported serious consideration by client base to adopting ILPA reporting. This year’s survey saw an uptick in the phrasing “standard offering”
- Furthermore, 80% of respondents said they saw a rise in usage of the ILPA template versus 50% in 2017.
While none of these findings are particularly outrageous, it is definitely worth downloading the full report to see the tables for yourself. Especially if you’re thinking about outsourcing for the first time, or changing provider. The tables are cut neatly in various ways, showing AUA for different asset classes, and regional breakdowns.