Jon Watkins, managing editor of Global Custodian, published an article about consolidation in the fund administration industry. BaseVenture’s own Chris Andraca contributed to the article, which is titled “Buy or be bought: The reality for fund administrators.”
The full article requires a subscription to Global Custodian, and can be read on Global Custodian’s site here.
Below are some highlights from the article:
- “This demand for outsourcing more post-trade functions and focusing on their core functions is a trend occurring throughout all sizes of hedge funds. Many are also requiring more front-office oriented products and services as back-office fund administration risks becoming more of a commodity where there is little room for differentiation. These demands are forcing administrators to enhance their offerings by building more tools, or if need be, buying them through acquisitions. ‘Industry consolidation among fund administrators has been intense over the past few years, driven mostly by increasing pressure to deliver on investors’ growing demand for transparency, as well as technology needs to improve operational and regulatory efficiency,’ said Chris Andraca, head of operations at BaseVenture.”
- “The technological capabilities of some of the biggest players through acquisitions means they are able to offer solutions that reduce costs, forcing more pressure on smaller, independent providers. ‘The best of the upstart fund administrators are aggressively tackling these challenges and growing quickly because of their efforts, while the largest fund administrators are realising that they are better off buying what they need to better compete,’ adds Andraca. ‘Just like what has happened with many FinTech companies, fund administrators seem to be more aware that they need a ‘buy or be bought’ strategy’.”
- “Andraca added that, as alternative asset classes and capital grow to encompass new forms of private debt, private credit and crypto funds, the need for outsourced administration of these funds will grow correspondingly.”
- “Andraca concluded that small- to mid-size fund administrators will need to make their technological capabilities as important as their accounting capabilities in order to succeed. With administrators all considering M&A activity, whether it is as the buyer or seller, it may well be that the largest players with the biggest and best technology capabilities continue to grow through acquisitions until there are only a handful of players left. Where it will all end, only time will tell.”
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