Will Wainewright

24/08/2011 Author: Will Wainewright

Diversification is key for admins as well as funds

The news this week that $26.8bn fund BlueCrest has taken on HSBC as administrator, broken exclusively on HFMWeek.com, will have set nerves jangling in the admin sector. GlobeOp, their current provider, will take some comfort that the move is part of a process of “expansion and diversification,” meaning they should retain a significant account with the fund. However, they will nonetheless be losing at least one fund to HSBC in the next six months.

It is a strong sign that funds are becoming less afraid to modify their administrator relationships, despite the traditional difficulties associated with doing so. Unlike some service providers, the links between admins and hedge funds run deep, and decoupling can be a convoluted process. But the move by BlueCrest, driven by a desire to diversify their admin base as assets grow, shows that funds will not be put off.

It adds to the pressure on an admin sector already busy looking for ways to diversify their own revenue streams and service offering (see news analysis, p14). The type of revenue model they employ can play an important role. Peter O’Dwyer, director at Trinity Fund Administration, says that charging by the hour for ancilliary and support services means their fortunes are less tied to the asset levels of clients.

The fortunes of bigger admins may be more directly connected to asset levels, but key players like Citco and GlobeOp are taking steps to find new business and expand their offering. The latter’s launch of a new SEC reporting service is a prime example. It just shows that “diversification and expansion,” for both hedge funds and the admins who service them, is crucially important in the current climate.

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