The new service, named Altinus , or Alternative Investment Utility Service, will be the first to market in an expected stream of managed account-style offerings from hedge fund administration firms, and is expected to open with near to $1bn in assets under management (AuM).  

Sources close to Butterfield Fulcrum, which is owned by private equity house 3i and currently provides an administration service for $72bn in hedge fund assets, say the firm is confident of rapid growth and expects the platform’s AuM to reach $10bn within its first 18 months of operation.

As the managed account fervour that started post-Madoff scandal in 2008 continues into 2010, more funds are yielding to investor pressure and are setting up segregated portfolios, offering better transparency and liquidity than traditional hedge fund structures.

Sources close to a number of existing managed account platforms have told HFMWeek that UBP, the Switzerland-based private bank, is also on the verge of launching its first funds of manage accounts. Last year, the bank described how it would convert its existing hedge fund investments into segregated portfolios. It is now believed to have selected Innocap, Lyxor and DBX to host these underlying funds.  

Butterfield’s new venture will work differently from existing platforms and, it is believed, the administrator will actively avoid labelling it as a managed account platform, instead referring to Altinus as a ‘utility service’. Butterfield began to construct the platform last year and has worked closely with managed account advisory business, the Mag Consultancy.   

Unlike Lyxor et al, it will not offer portfolio management services or distribution, instead concentrating on valuations and providing a thorough risk management service for clients. The platform will also be aimed at asset allocators, like funds of hedge funds (FoHFs), rather than the end investor. According to sources, Butterfield’s administration unit is keen not to alienate existing managed account platforms, for which it already provides administration services, by setting up a service in direct opposition.

However, its new platform will be competitively priced and will be squarely aimed at undercutting the traditional managed accounts space. Charging 40bps for its service, compared to the 70-80bps charged by other managed account platforms, it is hoping to quickly establish itself as the most cost-effective solution for the middle market.
While Butterfield is already building a client base by actively marketing Altinus to its existing hedge fund and FoHF clients, other hedge fund administration companies, including SS&C, are investigating similar launches, which are all expected to make an appearance later in 2010.