Mitsubishi UFJ looking at further fund administration acquisitions
Mitsubishi UFJ Financial Group is actively considering further acquisitions of hedge fund administrators following its purchase of Butterfield Fulcrum.
“We are looking at various opportunities out there. Mitsubishi, which has historically serviced long-only funds and pension plans, would like to expand its Asia-based hedge fund offering,” said Blair Henderson, head of business development at Mitsubishi UFJ Fund Services in London.
Despite their volatility, Asia-based hedge funds are experiencing record inflows. Assets under Management (AuM) in the region grew to $112.3 billion and this is set to surpass its 2007 peak, according to data from Hedge Fund Research. “The hedge fund industry in Asia is growing markedly, and there are a lot of successful managers in Australia and Singapore, while Japan has a surprisingly sizeable hedge fund industry,” continued Henderson.
The once highly saturated hedge fund administration market is rapidly consolidating, and most believe that only the largest standalone or bank-backed firms will survive. A number of the smaller administrators have struggled to make decent revenues as their clients have failed to grow AuM.
There have been a series of mergers in the fund administration space. In November 2013, US Bancorp Fund Services acquired the Dublin-based Quintillion, having already purchased AIS Fund Administration in 2012. Other high profile deals have included SS&C’s acquisition of GlobeOp. The highest profile deal of late was the acquisition of Goldman Sachs Administration Services by State Street AIS.
The incoming Alternative Investment Fund Managers Directive (AIFMD) is also going to cause problems for standalone fund administrators seeking to attract European business. The Directive requires AIFMs to appoint a depository or depo-lite if they market to EU investors via national private placement regimes.
Many standalone administrators with little - if any - balance sheet capital are establishing depo-lites, which are not subject to the stringent liability provisions contained in AIFMD. However, there is speculation the European Securities and Markets Authority (ESMA) could force AIFMs to appoint a full depository around 2018, which would be unviable at standalone administrators lacking a banking license or balance sheet.