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egy sets like infrastructure, real estate
and private credit within closed ended
structures, seems to be effective where
the organisation adds specific talent to
their team,” says Joe Patellaro, global
head of private equity services at SS&C
Technologies.
Servicing new asset classes
While there are overlaps across all asset
management types, there are some
major differences. Correctly valuing the
assets held in a real estate, private equity
or infrastructure portfolio is a more
time-consuming and complex process
than striking a NAV (net asset value) for a
money market mutual fund. “Real estate
and infrastructure structures can be very
esoteric as firms will often have a large
number of holding companies or SPVs
sitting in between the main fund and the
actual underlying assets,” says Tobin.
The client and regulatory reporting
obligations for illiquid portfolios also
diverge significantly from those run by
more retail-focused managers. “There
are certainly some differences in the type
of reporting expected by a closed ended
fund versus the obligations required at a
liquid or actively traded manager. One of
our roles as an administrator – through
technology and people – is to help, solve
and support any changes in the managers’
investment strategy whatever they may
be,” comments Patellaro.
Finding the right administrator
A consensus is fast emerging that ad-
ministrators offering multi-asset class
coverage are going to be the primary
beneficiaries of asset managers’ strategy
diversification efforts. “As a wholesale
bank, we can provide clients with fund
administration, middle-office services,
depositary, capital call financing and
securities services, in addition to advisory
services around acquisitions and dispos-
als. This is in effect a one-stop shop for
multi-asset class managers,” says Lynch.
Others broadly concur. “SS&C Tech-
nologies services a wide range of asset
classes including hedge, private equity
and real assets, and we have a large num-
ber of specialists in each dedicated field.
A hedge fund looking to transition into
real estate would not be dealing with the
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hedge fund team, but the people working for me,” says Malde.
The large geographical footprints of major providers – relative
to their smaller peers – also gives them a competitive advantage.
“Our geographical footprint is certainly something that is appre-
ciated by international managers, such as infrastructure,” says
Tobin. Others agree. “We have a broad geographical footprint,
and we believe that this is of increasing importance to clients.
For example, our long-standing presence in Asia has helped us
not only win mandates from managers overseeing Asia-focused
strategies, but also to provide our views on industry activities in
the region to other clients,” comments Patellaro.
The options for specialist providers
The providers – by virtue of having significant balance sheets,
ready access to debt capital markets or generous private equity
owners – have found the transition easier to make than firms
whose AUA is more limited or where growth has been stagnant.
Specialists – while they are able to support complex or bespoke
requirements of certain fund subsets – are highly vulnerable
to negative headwinds or cyclical dynamics that impact their
customers.
This leaves administration specialists with two options. They
can either retrench and focus on their core capability clients,
“We have seen a significant growth in managers pursuing
private debt and lending strategies as banks reduce their
balance sheets.”
IAN LYNCH, GLOBAL HEAD OF ALTERNATIVE INVESTORS, BNP PARIBAS SECURITIES SERVICES
hoping to ride out the strategy convergence trend. Alternatively,
they can merge with different providers to generate synergies
and broaden their product horizons and customer depth, a point
made by Sanchez at Northern Trust. Fund administration M&A
has been rising steadily and while low margins and bank delev-
eraging have been big factors driving consolidations, so too has
client diversification.
“Specialist providers looking to target a new asset class will
have to bring in people with the relevant know-how and make
sure they have the correct technology to service that particular
fund type. That is clearly a major business decision to make for
any organisation, and one that requires serious investment, time
and effort to complete successfully. The alternative is to consol-
idate and achieve growth through economies of scale, and this is
something we are seeing happen regularly as evidenced by the
sheer number of administrators on the market for sale today,”
says Malde.
As returns begin to slump at alternative and traditional asset
management, more firms are diversifying their strategies and
developing products focused on loans, infrastructure and real
estate. This is forcing firms to reassess their administrator rela-
tionships, something which may result in more managers port-
ing business from specialist providers to those offering genuine
multi-asset class solutions.
Fall 2018
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