In a climate of increasing regulatory scrutiny, hedge funds need an administrator with both experience and credibility, and JP Morgan has scored well on both counts. Existing and prospective clients have referred to it as a trusted partner at a time when they are concerned about counterparty risk and the safekeeping of cash and assets.
During the year, it has had a 9.1% increase in assets under administration, which was well ahead of the majority of its competitors. It came in a year that saw many hedge funds close on the back of significant redemptions.
JP Morgan has often been chosen for its ability to provide a ‘one-stop shop’. One example is when a large UK foundation required a provider that could offer custody and consolidated accounting and fund administration for both their long-only and fund-of-fund business. JP Morgan demonstrated that its systems, business processes and people were flexible enough to meet the specific needs of the foundation. Its ability to offer a flexible passive currency overlay programme was also appealing.
The group has shown itself to be adept at recognising and adapting to new market trends. For example, it can service Ucits-compliant funds while bringing in services from its traditional mutual fund accounting and custody business.
The ability to service managed accounts has become an increasingly important skill as institutional investors have sought to move away from the risks associated with pooled mandates.
The group has attributed part of its success to ongoing reinvestment in technology platforms and infrastructure – it reinvests more than 20% of annual revenues in this area, expanding its proprietary capabilities. It has launched many enhancements, such as a new interface between Wall Street Office and Advent Geneva to provide best-in-class reporting on a hedge fund’s loan positions; electronic access to third-party pricing sources for over-the-counter (OTC) derivatives and straight-through processing in middle-office operations; and facilitated its clients’ distressed debt-trading strategies. It has also developed its partnership further with the custodial bank and prime brokerage divisions.
JP Morgan has successfully automated the capture and setup of several OTC derivatives and complex securities, including credit derivatives, total return swaps, interest rate derivatives, OTC options and bank loans. The group remains ahead of the pack.
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