Fund managers appear to be growing increasingly unsatisfied with their fund administrators. Common complaints include archaic data portals, overly manual processes, high levels of staff churn and poor client service.
These grumbles are backed up by TrustQuay’s recent Future Focus Report, a global survey of 120 corporate services providers, trust and fund administrators. It found that only one in three respondents have started their digitalisation journey; only 33% have consolidated data into a single platform; 87% still use manual processes for data inputs and data checks; and 84% do not have a client portal. Meanwhile, 75% of respondents say they could be more efficient and reduce costs, while only 25% believe they are more profitable than their competitors.
These worrying but probably unsurprising findings make it clear that fund admins are well aware of their shortcomings. Indeed, according to Fergus Adams-Cairns, executive director at Sheffield Haworth: “It’s not surprising to see that fund admins are facing similar challenges when it comes to tech. Whilst some have acquired firms with an established capability, the successful integration and subsequent adoption of these platforms is critical to ensure any new capability is optimised. This takes significant time, resource and investment to implement these programmes, particularly in conjunction with BAU and client delivery.”
And the high volume of consolidation in the space is also causing problems when it comes to talent. “Ultimately this is a people-led sector,” says Frances Denny, managing director at Sheffield Haworth. “The sector has experienced huge levels of change in recent years, with smaller firms growing quickly via M&A and changes in ownership. But these companies are operating within a finite talent pool, particularly in offshore jurisdictions, which means there is a race to attract and retain talent.”
According to Denny, high levels of unrest during the past 18 months have seen fund admins offering up to 30% salary upticks in order to attract talent.
“This is a growth industry,” adds Adams-Cairns. “These businesses have gotten bigger, more complex and have moved into more markets – and the people challenge has grown. Ultimately, they are all on an ongoing journey of professionalisation.”
Fortunately, as fund admins tread the path towards professionalisation, many are adopting the behaviours of corporates to tackle the people problem. Says Denny: “Some companies are looking at ways to incentivise employees beyond remuneration, for example focusing on the employee value proposition. Some offer EBT schemes, and many are investing in training and upskilling talent. We’re also seeing some companies create really cool office environments to offer more engaging working spaces.”
Despite the people and tech challenges, many fund admins, thanks to their private equity backers, are hell bent on becoming major global players. With this, we are starting to see the arrival of a new set of leaders. “Some of the large admins are beginning to bring in new leadership talent from outside of the sector, providing a fresh perspective and set of skills to support firms as they scale. As service models evolve, the nuances of complex regulation in different jurisdictions will need to remain at the forefront, particularly for US players expanding into the EU,” observes Denny.
With several fund admins now on their third or fourth cycle of PE ownership, and the majority of these deals having been done at considerably high valuations, the proceeding years will be telling for this sector. There will likely be more consolidation, and innovation will be needed to provide something compelling in what is increasingly becoming a commoditised offering. “With further consolidation anticipated, it’s going to be interesting to see how this plays out over the next couple of years,” concludes Adams-Cairns.
For now, we have put together an overview of the fund administration landscape to provide a snapshot of where we are now, detailing add-on acquisitions, tech systems, team sizes, services offerings and geographical reach.