Citi to exit hedge fund administration
Citi has announced it is to exit hedge fund administration amid lower than expected earnings.
Its hedge fund administration arm, which according to Evestment, has just under $300 billion in Assets under Administration (AuA) is being relocated to Citi Holdings, the bank’s portfolio of troubled assets.
“After conducting an in-depth review of our Investor Services platform, we have determined that Hedge Fund Services is not core to Citi’s long-term strategic direction and will be relocated to Citi Holdings. There will be no immediate effect on the day to day operations of the business or the levels of service provided to clients, and Citi is fully committed to continue supporting all client activities and needs as usual during the transition,” said a Citi spokesperson.
Other non-core businesses being exited by Citi include prepaid cards, certain transfer agency operations and wealth management administration.
Regulation, such as Basel III capital requirements, is forcing banks to scale back on business units deemed as high cost and low margin, such as hedge fund administration. Once a highly saturated landscape, many fund administrators are struggling as their hedge fund clients struggle to grow their Assets under Management (AuM). A survey of hedge fund administrators by eVestment in 2014 found 95% believed M&A would play a significant role in the business over the next few years.
This was evident in 2014 when BNP Paribas Securities Services announced it would buy the fund administration arm of Credit Suisse creating an administrator with combined alternative AuA of $231 billion. Mitsubishi UFJ Financial Group acquired Butterfield Fulcrum and Meridian, two Bermuda-based fund administrators. In November 2013, US Bancorp Fund Services acquired the Dublin-based Quintillion, having already purchased AIS Fund Administration in 2012. Other high profile deals included SS&C’s acquisition of GlobeOp. Perhaps, the highest profile deal of late was the buy-out of Goldman Sachs Administration Services by State Street AIS creating the world's largest hedge fund administrator.