Citi gained significant traction this year in the competitive arena of servicing alternative funds when it acquired the Bisys Group. While Citco remains the name to beat when it comes to this niche business, Citi executives have expressed confidence that that they could soon catch up with the established powerhouse following the acquisition.
David Russell, who is regional sales head for fund and securities services at Citi, says the Bisys acquisition provides the banks with capability to service private equity firms, something that Citi lacked before. The acquisition, he adds, will serve to heighten competition in the industry. Before the acquisition, Bisys had already attracted a customer base of start-up and established hedge funds, as well as fund of funds.
Russell says their goal is to work with the bank’s prime brokerage arm to provide an integrated service to hedge fund and private equity fund clients. “The demand for such overall service is something we are starting to see in the industry.”
Bisys is already among the top three players when it comes to providing administration for alternative funds based on the assets of hedge funds, fund of funds and private equity funds being administered. It services over 100 hedge funds across the globe with combined assets of US$365 billion and administers over US$70 billion of private equity funds from over 100 sponsor relationships.
Most of these relationships are in the US and Europe and the bank’s goal is to expand the growth of the franchise in Asia where at the moment Bisys has a dozen existing relationships involving 15 funds with total assets of US$500 million.
Glenn Kennedy of Citi Fund Services (Asia) says Bisys integration with Citi’s operation is still an ongoing process and has been proceeding quite smoothly with Bisys staff starting to locate themselves into Citi’s offices in November.
Meanwhile, new players are coming out of the woodwork to provide more competition in the alternative fund servicing space.
Limited resources
A clear example of this is Skye Fund Services, which was launched in September “to bring a fresh approach to outsourced administration services for the alternative investment fund industry in Asia”. Skye Fund Services provides administration, middle office and support services to private equity funds, hedge funds, funds of hedge funds, and real estate funds.
Its co-founders, Dominic Jones and Javed Rahman, gained wide experience in fund administration and business process outsourcing in different parts of the world. Skye’s chief executive officer, Javed Rahman, says he was inspired to set up the business given growing complaint among many start-ups funds that they are not being serviced enough by the big players whose attention is often focussed on bigger clients.
Rahman says there are simply not enough resources even among big providers to focus on the needs of the small players. By providing a boutique service, Skye can better respond to those needs, he says. Rahman says that at the start, Skye will have four people to service clients. The group, he assured, has already made sufficient investment in technology to be able to scale up the service and answer the needs of their clients in an efficient manner. In the first year, he adds, the target is to attract at least a dozen or so funds to be their first clients.
Jones, who is chairman of Skye, was a former partner and founder shareholder at Mourant and was recently CEO of a leading European private equity administration company with US$21 billion in assets under administration; he had also worked at Clifford Chance and Morgan Stanley and is a qualified attorney both in the UK and in France.
Javed has over 17 years of senior level experience in the US, Hong Kong and Singapore in leading administration and outsourcing businesses, including Citigroup, Mellon Financial and First Chicago (now JPMorgan Chase) and The Hartford. Jones says that he gains a high degree of satisfaction when helping clients focus on optimizing the value of assets under management instead of spending too much time on non-core but critical support activities.
