Regs Provide Opportunity for Fund Admins04.15.2015
Maitland, which has more than $200bn of global assets under administration, is entering the UK market as regulations shift more alternative managers on-shore.
In a statement Maitland said it had acquired Phoenix Fund Services, the UK firm with £6.2bn under administration, which will boost Maitland’s assets under administration to more than £140bn ($210bn).
Steve Georgala, chief executive of Maitland, told Markets Media that the firm had been looking to enter the UK for many years as it is very similar to the firm’s home market of South Africa.
Maitland launched in Luxembourg in 1976 but Georgala said the UK platform will allow it to expand in Europe due to the European Union’s Alternative Investment Fund Managers Directive.
Georgala said: “Regulation is our friend as the added cost leads to increased outsourcing. Reporting under regulations such as AIFMD can only be done if you are also doing the administration.”
Maitland’s new UK platform will also be able to act as an administrator for funds selling into Europe, alongside the existing Luxembourg office.
“AIFMD is driving funds on-shore and more UK fund managers will be looking for mainland administrators,” added Georgala. “By adding our hedge fund and private equity capabilities to the Phoenix platform, this will give us a bigger leg up.”
Georgala said fund administrations need scale across all their services to succeed and Maitland will be looking to make more acquisitions, particularly in the US. In 2013 Maitland acquired Admiral Administration, the hedge fund administrator with offices in the Cayman Islands, Dublin and the US.
“There is huge onshore opportunity for consolidation in the US,” he added. “Most on-shore administrators offer only private equity or hedge fund services and very few can offer all our capabilities.”
A report from PwC last August on hedge fund administration said there was strong demand for regulatory reporting services, such as AIFMD and Solvency II. PwC also said the demand for liquid alternative products was an opportunity for fund administrators.
“Citi Prime Finance estimates that these products will exceed $900bn in AUM by 2017,” added PwC. “At this rate of growth, the administration industry could capture incremental revenue in the range of $600m to $825m on an undiscounted basis for the period of 2013 – 2017.”
The report said there are also opportunities for administrators to offer private equity administration services.
“The US addressable market for private equity administration remains large, at 73% of invested capital (or ~$1.7 trillion),” said PwC. “If private equity outsourcing were to reach 50% by 2018 (it’s currently at 30% today) then the incremental revenue opportunity for the fund administration industry is $660 to $880m on an undiscounted basis for the period of 2014 – 2018.”