JTC
JTC’s Nigel Le Quesne discusses why the US is a key growth market for the firm after its recent acquisition of NES Financial
Why is the US a ‘key growth market’ for JTC?
The US has been a key growth area for us for some time. We believe that the US fund administration sector is still consolidating and will continue to do so for some time. Market drivers such as increased regulations, a trend for more outsourcing of administration services and advances in technology mean that many clients now want to work with a global administration partner that has the expertise, experience and technology to meet their needs. The prevalence of using a third-party administrator, for instance, is much lower in the US (around 35 percent of managers) than in Europe (around 70 percent of managers) so the growth potential in the US alternatives space is significant. This, combined with the structural growth we are seeing in capital allocation to alternative assets means that there is much more to go for in terms of the number of funds that outsource administration.
That all makes it a highly attractive market for us, and in our recent acquisition of NES Financial (NESF), we feel we have found the perfect partner and platform to drive the strategic expansion not only of our US fund administration business but also our Institutional Client Services Division more widely. Our focus now is on integrating NESF into our existing business – it will play a key part in our drive to win new business and increase our global market share of the fund administration market.
What current opportunities are there to be had in the US fund administration industry?
As part of our established inorganic growth strategy, we had been looking for a fund administration platform in the important US market for some time. We see a lot of potential deals and have a very disciplined approach to mergers and acquisitions, using very specific criteria that guides our research, due diligence and negotiations.
In NESF, in particular, we saw the perfect combination of an established fund administration business with a real focus on client service excellence and innovative business that has embraced technology to provide better and more efficient services. In addition, the NESF team are very strong and were completely aligned with our culture. For all those reasons, we believe that NESF is the perfect partner to create our fund administration platform in the US and connect that market to the capabilities in the rest of the JTC Group. Ultimately, by building our US platform, we feel there is a real opportunity to harness that experience, strength and capability to bolster our global proposition.
What other trends are you seeing in the market?
At JTC, we talk a lot about us being a people business that is enabled by technology and those ideas remain key trends for us. We believe that deep expertise and strong relationships will always be of vital importance to clients, but that over time technology capabilities will naturally sit alongside those elements to create the optimal service proposition. The technology capabilities that we are looking to buy and develop are those that enhance client service levels, enable new services and deliver operational efficiency.
Certainly, in the current environment, strong relationships underpinned by a reliable, innovative technology platform are more valuable than ever, and that will continue to be the case long term.
What are the biggest challenges for JTC right now? Have priorities shifted amid the COVID-19 pandemic?
The COVID-19 pandemic is unprecedented, and our primary concern has been for the wellbeing of our people, our clients and our partners. However, we have been delighted with the resilience the business has already shown in dealing with the impact of restrictions - our business continuity team had over 900 colleagues up and running with home working in a matter of days.
It has been a challenge, of course, but the nature of our business means that we can continue providing our services to the usual high standards even under extended business continuity conditions.
It is too early to tell what the longer-term impacts might be, for example around business development work, but at the present time we are still seeing great engagement from our clients and partners and we are still winning new mandates.
With regulations being delayed due to the current situation, how will this impact the market?
The immediate focus generally in the sector is on ensuring business continuity and providing clients with reliable ongoing support. There will clearly be an impact on the markets and something of a hiatus in terms of deal completion, fund launches and regulatory initiatives coming on track, but our experience tells us that fund managers, corporates, financial and professional services firms, as well as HNW/UHNW individuals and families, all acknowledge the importance of compliance with increasingly wide‑ranging and complex regulatory regimes in the long run – and many are taking the opportunity now to focus on governance and regulatory functions.
They understand that requirements for accurate and timely disclosure of information have increased and will continue to do so, long after the coronavirus pandemic. Clients are increasingly turning to specialist administrators with global reach, knowledge and experience to manage this, so whilst new regulations might be on hold, it is certainly busy in terms of regulatory advice.
How do you think the pandemic will overall impact the fund administration market short and long term?
In the short term, administrators will likely see a spike in activity as managers and investors look for solutions to challenges thrown up by the pandemic, such as market turmoil, structuring issues, governance and compliance, and fundraising.
Longer term, ultimately, the pandemic will really put the resilience of fund administrators to the test, and we are likely to see some winners and losers in that respect.
From our point of view, we have always believed that JTC is a highly resilient business and the challenges presented by COVID-19 have brought this into focus. The response of the group has been excellent and we are confident of our ability to successfully trade through this period for a number of reasons. We have, for example, a highly experienced management team; a track record of revenue and profit growth spanning 32 years; a well-invested and scalable global platform; and we are well diversified across clients, services and geographies.
In order to maintain a clear focus during an unprecedented and fast-changing scenario, we have adopted three core principles to guide our actions. ‘Wellbeing’ relates to actions that will support and protect the wellbeing of our people, clients and partners; ‘service’ relates to actions that will ensure continued service excellence to clients whilst minimising impact wherever possible; and ‘commercial’ relates to actions that will support all JTC stakeholders and minimise any long-term commercial impact on the group.
Finally, is there anything else in the pipeline for JTC? Are you planning any further expansions?
JTC has a strong track record of performance and growth spanning more than 30 years – something that came across strongly in our recently announced annual results, which reflected both our organic and inorganic growth.
We will continue to drive our organic growth, by making improvements to our ‘go to market’ strategies and activities, enhancing and expanding our service offering and expertise, and applying new technological capabilities in new smart ways. We fundamentally believe that the combination of our people, technology, processes and global reach will enable us to continue to win new business, access established markets and successfully develop new markets.
Alongside that, however, growth through acquisitions remains an important part of our future. We continue to see consolidation across the sector and have good visibility of deal flow of all sizes, and we will continue to take a disciplined approach to any further acquisitions – monitoring opportunities for further acquisitions in particular in the US, the UK and mainland Europe.
Why is the US a ‘key growth market’ for JTC?
The US has been a key growth area for us for some time. We believe that the US fund administration sector is still consolidating and will continue to do so for some time. Market drivers such as increased regulations, a trend for more outsourcing of administration services and advances in technology mean that many clients now want to work with a global administration partner that has the expertise, experience and technology to meet their needs. The prevalence of using a third-party administrator, for instance, is much lower in the US (around 35 percent of managers) than in Europe (around 70 percent of managers) so the growth potential in the US alternatives space is significant. This, combined with the structural growth we are seeing in capital allocation to alternative assets means that there is much more to go for in terms of the number of funds that outsource administration.
That all makes it a highly attractive market for us, and in our recent acquisition of NES Financial (NESF), we feel we have found the perfect partner and platform to drive the strategic expansion not only of our US fund administration business but also our Institutional Client Services Division more widely. Our focus now is on integrating NESF into our existing business – it will play a key part in our drive to win new business and increase our global market share of the fund administration market.
What current opportunities are there to be had in the US fund administration industry?
As part of our established inorganic growth strategy, we had been looking for a fund administration platform in the important US market for some time. We see a lot of potential deals and have a very disciplined approach to mergers and acquisitions, using very specific criteria that guides our research, due diligence and negotiations.
In NESF, in particular, we saw the perfect combination of an established fund administration business with a real focus on client service excellence and innovative business that has embraced technology to provide better and more efficient services. In addition, the NESF team are very strong and were completely aligned with our culture. For all those reasons, we believe that NESF is the perfect partner to create our fund administration platform in the US and connect that market to the capabilities in the rest of the JTC Group. Ultimately, by building our US platform, we feel there is a real opportunity to harness that experience, strength and capability to bolster our global proposition.
What other trends are you seeing in the market?
At JTC, we talk a lot about us being a people business that is enabled by technology and those ideas remain key trends for us. We believe that deep expertise and strong relationships will always be of vital importance to clients, but that over time technology capabilities will naturally sit alongside those elements to create the optimal service proposition. The technology capabilities that we are looking to buy and develop are those that enhance client service levels, enable new services and deliver operational efficiency.
Certainly, in the current environment, strong relationships underpinned by a reliable, innovative technology platform are more valuable than ever, and that will continue to be the case long term.
What are the biggest challenges for JTC right now? Have priorities shifted amid the COVID-19 pandemic?
The COVID-19 pandemic is unprecedented, and our primary concern has been for the wellbeing of our people, our clients and our partners. However, we have been delighted with the resilience the business has already shown in dealing with the impact of restrictions - our business continuity team had over 900 colleagues up and running with home working in a matter of days.
It has been a challenge, of course, but the nature of our business means that we can continue providing our services to the usual high standards even under extended business continuity conditions.
It is too early to tell what the longer-term impacts might be, for example around business development work, but at the present time we are still seeing great engagement from our clients and partners and we are still winning new mandates.
With regulations being delayed due to the current situation, how will this impact the market?
The immediate focus generally in the sector is on ensuring business continuity and providing clients with reliable ongoing support. There will clearly be an impact on the markets and something of a hiatus in terms of deal completion, fund launches and regulatory initiatives coming on track, but our experience tells us that fund managers, corporates, financial and professional services firms, as well as HNW/UHNW individuals and families, all acknowledge the importance of compliance with increasingly wide‑ranging and complex regulatory regimes in the long run – and many are taking the opportunity now to focus on governance and regulatory functions.
They understand that requirements for accurate and timely disclosure of information have increased and will continue to do so, long after the coronavirus pandemic. Clients are increasingly turning to specialist administrators with global reach, knowledge and experience to manage this, so whilst new regulations might be on hold, it is certainly busy in terms of regulatory advice.
How do you think the pandemic will overall impact the fund administration market short and long term?
In the short term, administrators will likely see a spike in activity as managers and investors look for solutions to challenges thrown up by the pandemic, such as market turmoil, structuring issues, governance and compliance, and fundraising.
Longer term, ultimately, the pandemic will really put the resilience of fund administrators to the test, and we are likely to see some winners and losers in that respect.
From our point of view, we have always believed that JTC is a highly resilient business and the challenges presented by COVID-19 have brought this into focus. The response of the group has been excellent and we are confident of our ability to successfully trade through this period for a number of reasons. We have, for example, a highly experienced management team; a track record of revenue and profit growth spanning 32 years; a well-invested and scalable global platform; and we are well diversified across clients, services and geographies.
In order to maintain a clear focus during an unprecedented and fast-changing scenario, we have adopted three core principles to guide our actions. ‘Wellbeing’ relates to actions that will support and protect the wellbeing of our people, clients and partners; ‘service’ relates to actions that will ensure continued service excellence to clients whilst minimising impact wherever possible; and ‘commercial’ relates to actions that will support all JTC stakeholders and minimise any long-term commercial impact on the group.
Finally, is there anything else in the pipeline for JTC? Are you planning any further expansions?
JTC has a strong track record of performance and growth spanning more than 30 years – something that came across strongly in our recently announced annual results, which reflected both our organic and inorganic growth.
We will continue to drive our organic growth, by making improvements to our ‘go to market’ strategies and activities, enhancing and expanding our service offering and expertise, and applying new technological capabilities in new smart ways. We fundamentally believe that the combination of our people, technology, processes and global reach will enable us to continue to win new business, access established markets and successfully develop new markets.
Alongside that, however, growth through acquisitions remains an important part of our future. We continue to see consolidation across the sector and have good visibility of deal flow of all sizes, and we will continue to take a disciplined approach to any further acquisitions – monitoring opportunities for further acquisitions in particular in the US, the UK and mainland Europe.
