05/14/2014

Deals Reshuffle Fund Administrator Ranks

The pending merger of Vastardis Capital and Conifer Group will create a fund-administration business that will leapfrog Credit Suisse and UBS among the largest administrators catering to SEC-registered managers.

Following the merger, which is expected to close any day now, the combined firm will have gross hedge fund assets under administration totaling $47.1 billion, according to Hedge Fund Alert’s Manager Database. Based on the newsletter’s annual ranking of the 20 largest fund administrators, that would be good for 17th place, just ahead of the two Swiss banks and Deutsche Bank (see ranking on Page 8).

Thanks in part to consolidation, the fund-administration business increasingly is concentrated among the top 20 firms, which together serviced 97% of the funds in the database as of the first quarter. That’s up from 95% two years earlier. Because it captures only SEC-registered fund operations, however, the database understates the scope of fund administrators that cater mostly to smaller fund shops.

The top three firms in the ranking — No. 1 Citco, No. 2 State Street and No. 3 SS&C GlobeOp — all increased their hedge fund assets under administration by double-digit percentages. Of the top seven firms — all with at least 5% market shares — only fourth-place BNY Mellon notched less than a double-digit gain.

No. 10 Mitsubishi UFJ made its debut on the top-20 list by virtue of its purchase of Butterfield Fulcrum last year.

Once the Vastardis-Conifer merger is completed, the new company will be called Conifer Financial, with headquarters in San Francisco. Conifer chief executive Jack McDonald will be president of the combined entity, while Vastardis founder William Vastardis will serve as chairman. New York-based Vastardis currently ranks 19th, with San Francisco-based Conifer not even close to the top 20.

But it appears that the wave of consolidation that reconfigured the sector in the years following the financial crisis has largely run its course — at least among the largest firms in the field.

“I think you’re unlikely to see combinations among the top 5-10,” said an executive at one administration firm. “The big players are extremely complicated to bring together, difficult to digest. It becomes very difficult to find the economic rationale — meaning the cost savings to do it — and the right personalities meshing to allow it to happen.”

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