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Alternative Assets Under Fund Administration Increase 14.15% In 2017

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Institutional investors have increasingly turned to alternatives as a means to improve performance and diversify their portfolios. The subsequent demand for institutional quality infrastructure and the imposition of new regulatory regimes have required a renewed emphasis on operational accuracy and efficiency. Fund administrators have stepped into this environment as key partners to asset managers’ continued success.

The survey represents the current state of the global alternative fund administration industry. We draw from conversations with a variety of firms across size and location to provide a comprehensive assessment of the industry.


  • Participants reported alternative assets under fund administration of USD 7.64 trillion and assets under portfolio administration of USD 1.75 trillion.
  • Aggregate asset growth was most robust in the private equity space compared to other asset classes. Asset growth in the funds of hedge funds space remained muted.
  • Respondents have become optimistic about growth prospects in Asia-Pacific, Latin America, and Africa while expectations for European business declined over the year.
  • M&A in the fund administration industry was robust in the past year and is expected to continue. The need for broader geographic footprints and for expanding product expertise drove much of the activity.


The eVestment Alternative Fund Administration Survey represents the current state of the global alternative investment fund administration industry and includes information from firms across the spectrum of size and services offered.

Institutional investors have increasingly turned to alternatives as a means to improve performance and diversify their portfolios. The subsequent demand for institutional quality infrastructure and the imposition of new regulatory requirements has translated into an added emphasis on, and technological advances in, operational accuracy and timeliness. In this environment, administrators have stepped into the role of partner, assisting clients with

valuation, risk analysis and regulatorycompliance, as well as with investor due diligence and reporting functions. The constant improvement in service offerings has made administrators key players in the ongoing health of the alternative investment industry.

At eVestment, we continue our commitment to cast a spotlight on the alternative fund administration industry by publishing our survey results. The 2017 administrator survey, the 17th edition to date, is one of many sources of industry intelligence offered by eVestment. Our Research Divisionproduces reports and commentary on industry performance, investor flows and structural changes across the global investment management space. eVestment maintains the industry’s leading global database of traditional and alternative investment products distributed through a flexible suite of cloud-based solutions. We help investors and their consultants select investment managers, enable asset managers to successfully market their funds, and assist clients in identifying and capitalizing on global investment trends.

eVestment looks forward to continuing our relationship with the fund administration industry and we thank all of the firms and individuals who have shared their valuable time and knowledge for this survey.

Industry Overview –M&A Remains Robust

Participating fund administrators provided assets under administration (AUA) for hedge funds, private equity, real assets, funds of funds, and liquid alternatives. Reported alternative fund AUA totaled USD 7.64 trillion, increasing 14.15% compared to the prior year’s results. Participants also reported USD 1.75 trillion in assets under portfolio administration (AUPA) for services provided to asset owners. Third party administration (TPA) continued to gain traction in the private equity and real assets space as evidenced by the increase in assets and number of funds administered by participating firms. Overall, growth rates were largely positive, but varied considerably across firms, asset classes, and regions.

Mergers and acquisitions in the fund administration space continued apace through 2016. The rationales for consolidation in the industry, local footprints, product expertise, and economies of scale remained intact. Expanding geographic presence was cited multiple times from firms with an acquisition history during the past two years. The majority of respondents expected further M&A activity, but the balance of those expecting net firm exits versus entries going forward was more symmetric than in surveys past. Many participants anticipate a bifurcated alternative fund administration market in the near future, one consisting of a greater concentration of assets overall and of niche firms in specific markets. We note that even with the spate of M&A over the past decade, the industry remains relatively unconcentratedas measured by the Herfindahl-Hirschman index, ranging from 0.11 and 0.14 across the four main asset classes –not taking into account geographic diversity which would provide further dilution.

Although some participants signaled that the industry’s increasing sophistication would be a barrier to entry, this message was tempered by mentions of the fluidity within the alternative
investmentlandscape and the challenge facing incumbents to keep pace.

“We foresee net firm entries to the alternative fund administration industry, particularly focused around private equity, real estate, and niche product support. I would expect M&A activity to continue as larger firms evaluate service oriented businesses against their strategic offerings.” – Mid-size U.S.-based Administrator

Industry Overview – Shifting Regional Expectations

In terms of anticipated business growth by geography, the ranked order of the various regions stayed the same as last year with the exception of Africa overtaking the Middle East for fifth place. Asia-Pacific and Latin America also rose noticeably in the rankings, while perceived prospects for Europe declined. While administrators did not unanimously cite any specific regulatory regime as having an adverse impact on fund formation, the implementation of AIFMD was frequently mentioned as a serious consideration for those looking to raise assets.

Alternative Assets Under Fund Administration

“Within private equity and real asset strategies, the main regulation driving the business is AIFMD. We see increased interest in Europe-domiciled funds from U.S. asset managers to leverage AIFMD compliant funds. Reverse solicitation is no longer the preferred distribution model for non-EU managers to attract European capital.” – Large Europe Focused Administrator

The Common Reporting Standard (CRS) was also frequently cited as being impactful to fund clients. However,given its nature vis-à-vis FATCA, and administrators’ general acclimation to the global regulatory environment, most respondents saw both AIFMD and CRS as an opportunity. Compliance and regulatory consulting, while costly to build out, has turned out to be an important source of value-add, particularly for administrators with a multi-national client base.

Alternative Assets Under Fund Administration

Across asset classes, private equity fund administration again ranked highest for anticipated business growth. Looking at firms’ regional focuses, we did not see much deviation from the group average on bullishness toward private equity TPA. On average, perceived prospects dipped for real assets and rose for funds of hedge funds over the course of the year. Expectations for the hedge funds and liquid alternatives stayed roughly flat compared to our survey conducted in the prior period.

Alternative Assets Under Fund Administration

Hedge Funds – AUA Growth Improved Over Prior Year

Participating administrators reported USD 3.92 trillion in hedge fund assets under administration at the end of 2016. This compares favorably to the USD 3.73 trillion reported to end 2015, for an increase of 5.18% year-over-year. Growth across firms was generally positive, with the median firm posting 10.70% growth in hedge fund AUA.

Twenty-three firms representing 59% of current hedge fund AUA reported regional breakdowns for both YE 2015 and YE 2016. Across geographies asset growth was most prominent in Asia-Pacific with reported AUA increasing from USD 53 billion at the end of 2015 to USD 63 billion currently, or 18.40%. North America and Europe growth were closer to the industry-wide level at 11.51% and 9.84%, respectively. Hedge fund AUA attributable to Africa, Middle East, and Latin America shrunk -8.26% year-over-year to USD 23 billion. As with the prior year, currency movements, most notably USDZAR, materially impacted the asset and growth statistics of certain non-U.S. focused firms.

Firm-level organic hedge fund AUA growth at the top end was mixed, and certainly within the bounds of performance based changes. Gains were markedly higher, measured on a percentage basis, for those in the middle and lower end of the AUA range.

Total asset bases continued to correlate highly with average fund size, with only a handful of firms bucking the trend. Across the twelve firms with average hedge fund client sizes of between USD 50 and 200 million, excluding RBC I&TS, aggregate assets grew from USD 351 billion at the end of 2015 to USD 461 billion for a growth rate of 31.34%. Average firm level AUA growth in 2016 for the aforementioned group stood at 46.37%.

On the regulatory front, administrators with hedge fund practices noted the Monetary Authority of Singapore’s new guidelines for operational risk management and outsourcing, the inclusion of hedge funds under South Africa’s Collective Investment Schemes Control Act (CISCA), and cyber security guidelines from the U.S. SEC and U.K. FCA as significant developments.

Alternative Assets Under Fund Administration

“Awareness of cyber security risks and our global IT policy is more important than ever before. Our clients have to be comfortable with our cyber security policies and procedures as they operate in regulated jurisdictions and therefore we have to ensure that, as a service provider, our firm adheres to best-in-class security practices.” – Mid-size Global Administrator

The emphasis on cyber security, while seen as inevitable by most firms that introduced the topic, was cited as absorbing significant resources particularly during the due diligence process.

Funds of Hedge Funds – Industry Shrinks Again

Administrators reported total fund of hedge funds AUA of USD 810 billion compared to the USD 859 billion reported during the prior edition of this survey. With the exception of Citco, whose FoHF business grew modestly, and SS&C, whose asset growth includes a number of acquisitions, FoHF AUA declined across ten out of the top twelve firms.

Contrasting with the notable decline in fund of hedge funds AUA, firms were more optimistic than they were the prior year for this business segment, as evidenced in figure 4.

Assets under portfolio administration (AUPA) reflects services procured by institutional investors, see figure 7. These services include, but are not limited to portfolio analytics, valuation reporting, statement reconciliation, and data aggregation, and are not dissimilar to administration services procured by funds of funds. This is the first time eVestment has elected to collect portfolio administration data for hedge fund and fund of hedge funds portfolios.

Portfolio administration may be an avenue for firms with public markets alternatives expertise to expand their addressable market, particularly given the saturation in fund administration for hedge funds. Institutions have also become increasingly sophisticated in implementing their alternatives allocations. Administrators across the board noted an increased willingness to co-invest as a means to deal with oversubscription, decrease average fees, and to increase exposure dynamically. This was true for private equity, and in more recent times for hedge fund and hybrid structures as well.

Alternative Assets Under Fund Administration


“We see increased willingness to co-invest based on opportunity set, generally in more specialized strategies like activist and credit. The co-investment structures themselves tend to be highly specific to the strategy and most frequently customized according to the underlying investor focus.” – Mid-size Americas Focused Firm

Private Equity –TPA Adoption Accelerates

Thirty-one firms contributed private equity and real assets AUA for this year’s survey. Reported AUA for year-end 2016 totaled USD 2.16 trillion. This total disregards methodological differences in calculating private equity AUA and we chose not to rank participants for PE or real assets AUA for this reason.

Private equity fund administration was an accretive area for most firms with sizeable gains prevalent among both large and small players; growth in the PE space was particularly robust in comparison to hedge funds and funds of hedge funds. Total reported PE AUA grew43.86% year-over-year while the median firm grew 32.00%.

Growth in the PE TPA space was also prevalent across different geographies. Using data from firms which provided regional AUA breakdowns for both year-end 2015 and 2016, we saw North America based AUA rise from USD 650 billion at the end of the prior period to USD 1.12 trillion at the end of 2016, for an increase of 72.08%. Similarly, Europe-based PE AUA stood at USD 394 billion to end 2016 gaining 38.52% and Asia-Pacific AUA was reported at USD 94 billion increasing 25.34%.

Administrators generally agreed that there continues to be increased scrutiny placed on the various fees, and investment practices in general of private equity funds, and that this sentiment has likely driven TPA adoption. Among consultants and LPs surveyed in eVestment’sPrivate Markets Due Diligence Survey, 43% of respondents said they “always” recalculated PE managers’ track records during investment due diligence and 33% said they “often” recalculated track records. While there was consensus around the need for increased transparency, or at least the capability to produce additional information if requested, firms were mixed on reporting standardization.

Asked specifically about the Institutional Limited Partners Association’s (ILPA) fee reporting template, most firms stated that the community was aware of its existence and certain participants mentioned incremental implementation. However, LPs in aggregate have opted not to push strongly for its adoption.

Alternative Assets Under Fund Administration

“Overall, there is an increase in the need for transparency to the investor base. Most investors continue to want more and more details around investments, funds, and where it all goes within the fund… We have seen from the more sophisticated investor base an increase in the use of ILPA reporting. However, [certain] investors still want simplicity and therefore some funds have ended up producing statements in multiple versions to keep investors satisfied.” – Global Bank-Affiliated Administrator

Real Assets – Frontier Market for Fund Administrators

For this year’s survey we asked firms to provide real assets (RA) in lieu of private real estate AUA to better capture interest in infrastructure and other strategies within this category. Eighteen administrators reported RA AUA totaling USD 638 billion (sums disregard calculation methodology). By comparison, thirteen administrators reported private real estate AUA of USD 414 billion at the end of 2015.

Fourteen firms provided regional breakdowns for their real assets AUA for a total of USD 405 billion. Among participating administrators, North America represented the bulk of these assets, or 61.63% of the total as of year-end 2016. Europe accounted for 35.98%, Asia-Pacific for 2.21%, and Latin America, Middle East, and Africa for 0.02%.

In addition to fund administration, administration services for asset owners’ private equity and real assets portfolios was also a growth area. Seven firms reported USD 1.48 trillion in PE and RA portfolio administration assets, dwarfing HF and FoHF AUPA. We note that certain firms did not use identical methodologies for their fund and portfolio administration figures. On a like-for-like basis, it is certainly possible that assets under portfolio administration currently exceeds that of participants’ PE and RA fund administration businesses.

Asked to what extent asset owners were seen in-sourcing investment management activities, participants with portfolio administration businesses generally stated that such decisions were idiosyncratic to each institution. The trade-offs between higher fixed costs and greater control internally were seen as not clearly leaning in one direction or the other. Furthermore, firms were unanimous in their assessment that in-sourcing would not materially impact alternative asset management firms.

However, we did receive one response, from a firm with a global presence and multi-asset class capabilities, which suggested that in-sourcing did occur to an extent in the recent past; we present the comment here.

Alternative Assets Under Fund Administration

“Over the past five years, we have seen a definite trend towards in-sourcing [investment management] among asset owners. However, we now see that momentum waning. We do not feel that it will have further material impact on third party alternative asset management firms in the future.” – Large Global Administrator

Liquid Alternatives – Minimal Overall Growth

Participants reported alternative UCITS fund assets under administration of USD 55 billion, compared to USD 51 billion at year-end 2015. Reported alternative ’40 Act fund AUA rose more dramatically, from USD 48 billion to USD 79 billion, with the inclusion of MUFG Investor Services. MUFG Investor Services added significantly to alternative ’40 Act AUA reported to the survey this year with its acquisition of Rydex Fund Services.

Growth rates across firms varied significantly, but the number of fund clients remained largely the same in aggregate. Although certain firms saw impressive AUA growth on a percentage basis, overall dollar levels remain undersized relative to other alternative asset classes. While Smart Beta and factor-based investments seem to have curried favor with investors, liquid alternatives, as an extension of the product space, have remained relegated to the sidelines across our survey participants.

Alternative Assets Under Fund Administration

Concluding Remarks

Participating administrators seemed more upbeat about their business prospects than in prior surveys, at least from our subjective vantage point. Although the core themes and issues facing the industry remain intact, firms appear to have shifted gears. Grappling with the sizeable operational and technological challenges of regulatory propagation occupied significantly less mind-share and respondents were more likely to mention the importance of effective client communication and education than in prior years.

Furthermore, the traction seen globally for operational support in private equity and real asset funds has been a boon for the third party administration industry – one that does not look likely to abate in the near future.

“The areas of valuation and cyber security remain focal points for managers and regulators alike. The impact seems more material in the private equity space, thereby driving demand for administrators and other third party service providers. – Mid-size Americas Focused Firm

Alternative Assets Under Fund Administration by Product Type

Alternative Assets Under Fund Administration

Assets Under Administration by Region

Alternative Assets Under Fund Administration

Article by eVestment

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