Fund Administration: This is Hunger Games!

Like in Suzanne Collins's novel, the fund administration industry is going through a battle for survival. The number of acquisitions has drastically increased in the last two years; quite a lot of famous brands have disappeared after being swallowed up by brands that are bigger or hungrier. The industry has always been a theatre for dramas. Countless names have been eaten and forgotten in the hotel of profit, which sometimes leads to long and painful integrations. But, this time, it is another story. The consolidation we are going through is without precedent. These service providers’ appetite for growth looks like a pump & dump micro stocks strategy: Let's make it huge, fast, and sell it big at the right time. Going public is another path that some of them already intend to take (Intertrust, Sanne Group), and we can expect, without a doubt, a few more in the upcoming years. Nothing against it, by the way, this is nothing more than a classic private equity strategy which has shown its profitability throughout the years. 

The question, though, is will small ventures be able to survive? In the fund administration history, a lot of success stories started with a few courageous entrepreneurs leaving their comfortable positions to dive into the big blue, encouraged by the success of their predecessors and some potentially huge returns on investment. These newcomers kept the industry vibrant and competitive, and encouraged companies to keep high-level standards in their deliverables by putting them under pressure with the risk of losing market shares. With the consolidation we are now facing, the structural cost of these giants will certainly be compressed, at best, allowing them to provide fees and pricing that small boutiques won't be able to compete with. The increase of regulation, compliance, and controls also won't help the smaller actors to stay profitable. We can expect a few big names to emerge, which may change the fund administration's industry landscape drastically. Is it for the best? It certainly depends on what side you are on. Client or provider, employee or shareholder, the purchased or the purchaser. The question will remain open, and the future will tell. In the meantime, let's have a look at those who disrupt the market the most and compete for the title of heavyweight. 

1. The Hungriest

With five major acquisitions in the last two years, Apex is without a doubt the hungriest. Deutsche Bank, Equinoxe, and Custom House are now globally part of one of the new biggest actors. Integration, though, may take some time and create interesting challenges for them to face. 

2. The Technology Master

SS&C was a software actor before becoming a fund administrator. But with the strategic acquisition of Geneva (software), SS&C has been well-positioned to acquire Conifer, Wells Fargo, or Citi in order to grow its footprint on the market. Its turnover is now even between software and fund admin revenue.  

3. The Biggest Deal

Link Group acquired Capita in 2017 for close to 1 billion euros, which is the biggest acquisition in the industry (if we exclude software companies). 

4. The Diversified 

Lately, SGG has been very active with international and local acquisitions. First Names (mostly trust and wealth management), Augentius (alternative investment fund administrator), CIM (Mauritius actor, mostly), and Ilyer Practice (corporate services in Singapore) are part of their diversification strategy. Integration is most likely their main concern now, especially considering the Asian market. 

5. The Publicly Owned

Intertrust & Sanne Group are the only two fund administrators/corporate services companies listed. It allows them to offer more transparency and stability to their people. For risk-averse employees, those companies are probably the best places to work. Sanne Group is also active, almost exclusively, in the very fast growing industry of PE/RE, debts/credit funds; which is no doubt a fast growing market that offers great perspective of growth.