All roads lead back to regulation: especially when it is affecting one’s cost base. What with Form PF and the Alternative Investment Fund Managers Directive (AIFMD), the break-even point for funds nowadays is getting ominously high, especially for smaller funds, which find that the regulatory and compliance burden becomes a much larger share of their overall costs.
All roads lead back to regulation: especially when it is affecting one’s cost base. What with Form PF and the Alternative Investment Fund Managers Directive (AIFMD), the break-even point for funds nowadays is getting ominously high, especially for smaller funds, which find that the regulatory and compliance burden becomes a much larger share of their overall costs.
Much institutional money is therefore being poured into the larger managers, who already have the infrastructure to cope with new and more onerous filing requirements. Larger funds have been doing better, smaller managers are suffering, and this then translates into those larger funds are requiring a larger and more established administrator. In particular, hedge fund administration produces higher fees than its mutual fund sister.
One firm which has picked up on this trend swiftly is Mitsubishi. In June 2013, Mitsubishi UFJ Trust and Banking (MUTB) acquired the fund administrator Butterfield Fulcrum, which became the global alternative asset administration platform of MUTB.
Glenn Henderson and Tim Calveley, CEO and deputy CEO respectively of Butterfield Fulcrum Group, stayed on, saying at the time that the acquisition reinforced their ability to deliver high quality fund services to their clients, while significantly increasing their breadth of products and services, geographic reach and financial strength.
“Even pre-sale, Butterfield Fulcrum was $110 billion AUA and we were still being told by some of our clients or future prospects that we were too small,” says Calveley. “Their underlying investors wanted to know there was a large institution’s balance sheet underneath us, so it was perfect for us to come under the Mitsubishi brand.”
Most recently, the expanded firm picked up Meridian Fund Services Group, raising the fund services business’s AUA to approximately $165 billion, servicing over 300 clients and 1000 funds.
Calveley says that the decision to buy Meridian over any other fund administrator was down to Mitsubishi’s two-fold strategy, of organic growth (backed up by the ability to brand under the Mitsubishi name and a hefty balance sheet), and an acquisitive nature.
“The reason we decided on purchasing Meridian was that both Glenn Henderson, and myself have known Meridian Fund Services and its chairman, Tom Davis, for a long time, as we are based in Bermuda. It was an easy decision because they were a very good fit for us—culturally the businesses are very similar in terms of operation, client service, etc. It was always going to be our first point of call.”
As for clients that have been picked up from the acquisition, Calveley explains that they are mostly institutional clients, the majority of which are US-based hedge funds. This gives scope for expansion into the European and Asian markets (Mitsubishi Fund Services have offices in Dublin, London, Tokyo, and have plans for Singapore)—which is of interest to US hedge funds with a global reach.
“Meridian didn’t have any operations in Europe or Asia, and as some of their clients are expanding out of the US into those areas, they are very interested in the fact that we can provide this service to their funds. Being a global firm and operating all around the world increases the advantages for their current clients.”
Clients are also interested, he adds, into value-added services such as custody, FX and securities lending. “Mitsubishi has an extremely active and large securities lending department, with the majority of services based in London and Singapore. It is very large, very successful, operation and a lot of our clients are very excited that we can offer not just securities lending but custody and FX.”
The one positive that boutique fund administrators always celebrate is their one-to-one service, whereby clients can closely and quickly interact with their administrator. However, this ethos is hopefully being brought into larger companies by virtue of the people that they are acquiring. Calveley is one such employee who lives by a client service motto.
“Over my years with Fulcrum and Mitsubishi, we’ve been through a number of ownership changes, and the common theme throughout any ownership change is that your client service must remain the same. What’s most important for a client is continuity of staff, and we really understand that. It doesn’t matter how big you are, as long as you can maintain that service level.”
