GlobeOp CEO says SS&C deal will help bring diversification plus hints at own departure
Hans Hufschmid, CEO at GlobeOp, has said the SS&C deal will enable GlobeOp to diversify its client base away from hedge funds, and hinted he “would probably move on” in time.
“We mainly service hedge funds but we want to diversify and work with more non-hedge funds too such as banks, pension funds, mutual funds, corporate treasuries and insurance companies. SS&C already services a lot of these businesses and we hope to complement it. It will also strengthen both firms’ already strong technology infrastructure,” said Hufschmid.
Speculation has been mounting that senior execs at GlobeOp including Hufschmid will depart once the transaction is finalised. Hufschmid, who has an estimated 13% stake in GlobeOp, is certainly going to be cash rich once the $920 million deal is agreed, which is due to happen this week. “I want to remain at GlobeOp to make sure the integration goes smoothly and in an orderly fashion. Once I am satisfied that has been done, I will then decide what to do next,” he said.
He added both businesses would be rationalised and ultimately restructured as the integration gathered speed. “The idea is to run both businesses separately initially although we will slowly integrate the two in a process which could take several years. The best of breeds will obviously be retained. However, the deal was done because we wanted scalability and it was not done to cut costs,” commented Hufschmid.
Predictably, some institutional investors and hedge fund clients expressed concerns about the deal, which will create a fund admin behemoth servicing northwards of $300 billion in Assets under Administration (AuA). One operations exec fretted there would be senior management changes while integrating both systems would be time consuming and potentially disruptive to business.
“We have and will (be spending) time visiting our clients and helping them understand there will be no degradation in service. Some fund managers are concerned there will be convergence and their administration services will be shifted onto a new, different platform. This will not happen. In fact, people will not notice any changes at first and over time they will benefit as we gradually introduce new tools,” said Hufschmid.
GlobeOp’s offices in India will also enable SS&C to continue its expansion throughout Asia, having already acquired Thomson Reuters’ PORTIA business, which has staff in Bangalore, Hong Kong, Singapore, Dubai, Tokyo and Bangkok.
“Having offices throughout Asia enables us to service London and New York more efficiently. We start work when London and New York are asleep so valuations can be available to managers first thing in the morning,” said Hufschmid.
Despite the audacity of the GlobeOp takeover, Hufschmid doubted SS&C would stop its acquisition spree just yet. “SS&C has got to the size it has by making acquisitions and it has made about 30 in the last few years. If there are attractive assets or businesses out there, I imagine it is something they would be interested in exploring further.”
The fund administration space has seen a surge in M&A activity since 2008. Goldman Sachs Fund Administration recently put itself on the market as the bank seeks to cut costs. One fund administrator reckoned State Street would be the most likely strategic fit for Goldman’s admin business – something that has been reported in several news outlets over the weekend.
“A lot of institutional investors want Tier 1 or large-scale administrators, and this is something that is driving the consolidation. Furthermore, a lot of banks are questioning whether having a fund administration unit is worthwhile, particularly with the capital requirements coming into place,” highlighted Hufschmid.