More optimism in 2010

What percentage of hedge fund/fund of hedge fund clients have you lost/gained in 2009? What are your forecasts for 2010?

Many administrators experienced a more positive year in 2009, although the pick-up in assets under administration (AUA) was somewhat dampened, only increasing in the second half of the year. For 2010 there is a much more optimistic outlook, with many forecasting significant growth, albeit from depressed AUA levels.

To date none of Omnium’s clients have resigned to switch to another administrator, says John Buckley. “Although some funds faced difficulties raising capital in 2009 and industry-wide AUA declined, Omnium has continued to be mandated by funds, expanding its client base by approximately 30%,” says Buckley. As an example, Omnium points to its mandate to perform asset servicing for its portfolio of derivative, corporate bank loan, commodity and principal investment portfolios for Lehman Brothers Holding.

Jonathan White at Viteos Fund Services lost around 25% of AUA in 2009 but expects AUA to grow by 100% this year.

David Morrissey says SEI’s growth has been organic. “We continue to invest in our business. That’s one reason why over the past 18 months our AUA have grown close to 30% and our pipeline remains strong,” he says.

Martin Tolcher at Legis Fund Services says no funds were lost in 2009. However, there were challenges in the early part of 2009, where there were gates or temporary suspensions for funds of funds. By the end of 2009 and start of 2010, Tolcher saw most enquiries continue.

“It seems that raising anticipated subscriptions remains a challenge for sponsors/promoters so that revenue streams for the administrators can be deferred due to delays in launching a fund after establishment and as less than expected is raised, depending on the fee structure. This is giving rise to more fixed-fee quotes. Administrators are endeavouring to protect set-up fees, especially if a fund launch is delayed,” he says.

“Our net subscription and redemption just for hedge funds in 2009 was a negative $19.4 billion that represents -17% on the open balance 2009,” reveals Paul Stillabower at HSBC Securities Services. “The market change for 2009 has increased by $4.8 billion, representing 4.2%,” he adds.

Hans Hufschmid at GlobeOp says AUA grew 24% in 2009 to $109 billion at December 31, 2009 and were up 30% during the second half of that year. “In the first six months of 2009, our clients’ redemptions and terminations totalled $33 billion. During this period we also added $15 billion of AUA from new clients and from new funds with existing clients,” he explains.

“Combined with subscriptions and positive fund performance, our AUA fell by just $5 billion during the first half of the year and ended June [2009] at $83 billion. From July to December we added another $18 billion of AUA from new clients and new funds with existing clients, resulting in a total of $33 billion of new business for full year 2009,” Hufschmid says.

While it is still early to know if the market recovery seen in 2009 can be sustained, Hufschmid says there are encouraging signs “with subscriptions outpacing redemptions and the addition of new clients so far in 2010. We have a promising new business pipeline and we have already added a new middle back office administration client with over $1 billion in AUA.”

According to Stephen Castree, Equinoxe Alternative Investment Services did not lose any AUA in 2009 and doubled in size over the year.

Dermot Butler at Custom House says forecasting, like budgeting, “is a broke man or a fool’s game”. Nevertheless, he has budgeted for a net 44 new fund accounts in 2010 which he expects to achieve by the end of the third quarter. “Aim high is my motto,” he says.

“Citi did not experience any non-desired client attrition in 2009 and largely the reduction in client numbers serviced was as a result of clients forced to liquidate their business as a result of the significant redemptions activity of 2008/09,” explains Richard Ernesti.

“The level of new fund launches in 2009 was very muted compared to prior years, however Citi continued to win new mandates. Our outlook for 2010 is very bullish with in excess of 10% new mandates already won, particularly in the Ucits/Irish domicile space,” says Ernesti.

Oliver Scully at Citco reflects that assets under management with funds dropped off significantly between mid-2008 until mid-2009 but have since picked up “through a combination of good performance and new business”.

In 2009 some of Butterfield Fulcrum’s clients closed their funds after experiencing large-scale redemptions and/or devaluation due to market conditions, says Akshaya Bhargava. “We did, however, take on over 100 new funds in 2009, approximately 60% hedge funds and 40% funds of hedge funds. These comprised both new fund launches and conversions of existing funds from another administrator to Butterfield Fulcrum. Forecasts for 2010 are quite strong, with a focus on managed accounts,” says Bhargava.

“BNY Mellon experienced very strong demand for its services during 2009, contrary to the global contraction in the industry, and experienced a 18.9% increase in assets during 2009 compared to the same period in 2008,” reveals David Aldrich.

Peter Hughes at Apex says the company did not lose any clients in 2009. “However, about 10 of our clients closed their funds and we gained 100 new clients,” he says.

“We would like to repeat this in 2010 but without the fund closing and with a focus on winning more institutional mandates now that our infrastructure and service offering is suitable to these managers that are looking to consolidate all their funds from several administrators to one global player,” Hughes concludes.