State Street acquires Goldman's fund admin business
State Street has acquired Goldman Sachs Administration Services for $550 million, the firm said in a statement.
The deal will create the world’s largest hedge fund administrator servicing $877 billion in Assets under Administration (AuA) overtaking Citco, which has approximately $500 billion in AuA. The transaction is expected to be finalised early in the fourth quarter of 2012.
Goldman Sachs employees, which will include client-facing staff and management, are expected to join State Street once the transaction has closed. The statement said Cory Thackeray, managing director and global head of Goldman Sachs administration unit would continue in his role.
The acquisition will also give State Street access to new markets including Cayman and Singapore.
“The deal will certainly give State Street access to some very high calibre hedge fund clients and the Goldman-State Street deal is just another example of the paradigm shift occurring in the fund administration business. Fund administrators are going to have to deal with numerous regulatory and market infrastructure changes making scale that much more important going forward,” said Andrew Kaufmann, vice president for EMEA at Viteos Fund Services in London.
AIFMD requires fund administrators to have a depositary or find a depositary partner. This will not come cheap and may force niche players to merge or even shut. Several firms including BNP Paribas have said investment banks might be reluctant to serve as depositary partners to competitors once the rules come into place in July 2013.
The latest sale came as Goldman sought to raise assets and streamline costs following a drop in overall revenue. Goldman also acts as prime broker to many of its own administration clients – something many institutional investors view as being contrary to best practice. “Investors and managers are concerned about counterparty risk and therefore some may want the prime broker and administrator to be separate,” said Kaufmann.
There has been a surge in fund administration M&A. In May 2012 GlobeOp shareholders okayed a £572 million takeover bid by SS&C Technologies, leading to a business servicing northwards of $300 billion AuA.
There have been numerous rumours about other fund administrators and bank backed administrators being up for sale. Some experts have speculated Morgan Stanley could be the next major player to sell its fund administration business.