US Bancorp Fund Services acquires AIS
Milwaukee-based US Bancorp Fund Services is to acquire AIS Fund Administration as M&A activity in the fund administration space shows no sign of abating.
The deal, which is subject to regulatory approval, will see the combined entity service $50 billion in alternative investment assets. A statement said clients at both US Bancorp Fund Services and AIS would continue to work with the same teams.
“We believe the addition of US Bancorp’s suite of services such as custody, trust and other banking services will provide significant benefits to our clients,” said Boris Tiomkin, CEO at AIS Fund Administration.
One expert said AIS’s hedge fund business would complement US Bancorp’s strong mutual fund offering. “The deal is not too dissimilar to when Wells Fargo acquired LaCrosse in 2011. It appears that some of these US banking houses are trying to build businesses in other directions. As we know, Wells Fargo went on to buy Merlin Securities, a prime broker, so it might not be unforeseeable if US Banking Corp did something similar,” said Peter Hughes, group managing director at Apex Fund Services.
There are more than 60 fund administrators in the highly saturated market. Smaller fund administrators in particular are feeling the pinch as hedge funds struggle to make and keep assets.
Furthermore, depositary liability, as mandated under AIFMD, could force these smaller fund administrators to merge or close. Some standalone administrators do not possess banking licenses which is a prerequisite to becoming a depositary and therefore will be forced to find depositary partners. This could be a challenge given that some banks and larger administrators will be reluctant to act as depositary partners to their competitors.
Bank-backed fund administrators are not immune either. Numerous banks are trying to streamline costs amid falling revenues and regulatory requirements. Fund administration therefore is a likely target given its cost intensive yet unprofitable nature.
These factors have all prompted numerous deals in the fund administration space. Last week, Maitland acquired Admiral creating an administrator servicing $145 billion in AuA. There have also been several high profile deals this year. SS&C purchased GlobeOp in May 2012 for $920 million while Goldman Sachs Administration Services was sold to State Street AIS for $550 million.
“There have been incredibly high levels of M&A activity in the fund administration market, and I predict it will continue. I have heard rumours about a number of potential deals, but the activity has been staggering particularly given that fund administration has had such a tough time making money over the last few years,” commented Hughes.