Gwyn Roberts

16/03/2011 Author: Gwyn Roberts

Editor's view: 17 March 2011

Ronnie Cohen, private equity player and current backer of hedge fund business IAM, is well-known for writing about the second bounce of the ball. The moment, frequently difficult to predict, when opportunity rears its head and turns risk into reward.

The hedge fund administration space is currently alive with this potential. Resurgent fund assets have stabilised the fortunes of these businesses, while the expansion of some firms’ middle- and back-office services have added additional revenue streams – a trend that can only grow as more mid-tier hedge funds look to outsource.  
 
Interest in admin businesses is currently at a high, as acquirers take a closer look at affordable firms with $30bn-40bn in AuA. But just who are the interested parties? According to admin-watchers, a trio of potential buyers is stalking the space.

Second-tier prime brokers are eager to link admin services to their core skills; private equity, never far away, is hovering; while other admins will swoop for businesses with interesting skill-sets or different exposures.   

The recent Butterfield Fulcrum buy-out, funded with private equity cash, shows that there is a hunger for these deals, while one only has to look at GlobeOp’s accelerating share price, up 90% since September, to see the potential growth in value.

As this uncertain year progresses, expect some interesting developments in the admin space.

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