European Fiscal Challenges Weighing on Otherwise Positive Year
Hedge Fund Administrator Survey Shows Impact of Regulation, Consolidation and Fiscal Struggles
NEW YORK (September 18, 2012) – According to eVestment|HFN’s 11th edition of their Hedge Fund Administrator Survey, issued today, the European economic challenges continue to weigh negatively on an otherwise positive year for hedge fund administrators. The survey also found that the trend of consolidation of assets towards the largest hedge fund firms is being mirrored in the alternative administration industry. The consolidation of the administration industry through acquisitions is being driven by economies of scale as regulation and more sophisticated services reduce margins.
“The administration industry is feeling the effects of the European crisis.” said Peter Laurelli, Vice President, Research, eVestment|HFN. “After seeing outright declines in reported Europe-based hedge fund assets under administration during the latter half of 2011, growth turned positive in the first half of 2012 for firms’ European businesses although lagging growth in other regions. Aggregate European hedge fund assets increased only slightly, 0.5%, while two of the top three administrators in the region saw their Europe-based assets decline during the period. Asia-Pacific-based assets increased 4.5% in the first half of 2012, slightly below the overall industry gain.”
The survey is a semi-annual publication and a measuring stick of the administration industry’s hedge fund and alternatives businesses, including regional representations. Firms were asked to submit total assets under administration (AuA) and the regional breakdown of their hedge fund clients, as well as for funds of hedge funds, hedge fund UCITS structures, hedge fund managed accounts and all other alternative investment structures. Forty-five firms submitted results, including all of the ten largest, which alone account for 85% of total administered hedge fund assets.
The survey found that firms reported $2.819 trillion in single manager hedge fund AuA for 12,130 hedge funds. Citco, State Street and BNY Mellon topped the league tables with a combined $1.3 trillion in AuA while the top five firms reported $1.8 trillion in single manager hedge fund AuA.
Single manager hedge fund AuA grew by 5.0% in the first half of 2012, a reversal from the decrease seen in the previous survey. Respondents were asked which segments in the alternatives space have seen strong allocations over the first six months of 2012 with the most frequently cited answers being structured credit and distressed debt strategies, and private equity funds, which fall into “other alternatives.”
Consolidation within the administration industry has been a key trend in recent history with firms seeking to take advantage of economies of scale and to offset the effects of costlier and more sophisticated services. The recent acquisition of GlobeOp by SS&C placed the combined firm firmly among the top five in terms of single manager AuA.
In addition to reporting hedge fund results, administrators also reported $763.5 billion in fund of funds AuA, $48.1 billion in managed account AuA, $123.0 billion in hedge fund UCITS AuA and $1.368 trillion in other alternative AuA. The total reported AuA for the alternative investment universe was $5.122 trillion at the end of Q2 2012, an increase of 7.0% for the first half of 2012.
eVestment is pleased to continue its commitment to cast a spotlight on the alternative fund administration industry by publishing its survey results. The Q2 2012 Administrator Survey is one of many sources of industry intelligence offered by eVestment|HFN with a dedicated research division that produces reports and commentary on industry performance, investor flows, and structural changes across the global hedge fund universe. In addition to its goal of serving the administration industry, survey results are a key source used by eVestment|HFN to measure the absolute size of the single manager hedge funds. The publication includes an example of how survey results are used to help created an estimate of the size of the hedge fund industry.
To access the full survey results, follow this link.