Where are the new or expanding markets for fund administration? How is growth in emerging markets impacting fund administration services?

Akshaya Bhargava at Butterfield Fulcrum believes managed accounts will be the big growth area. Bhargava also expects growth in emerging markets to lead to the establishment of more prime broker relationships as clients trade locally in those markets. 

“This impacts the administrator’s reconciliation process,” notes Bhargava, as the investigation of any trade breaks or reconciliation items can take longer to resolve if the broker is halfway around the world. “The impact of this issue can be minimised if the administrator has a global network of offices connected by a common technology platform and operating model; the reconciliations can be handled by the office closest to the time zone of that local broker.”

“The old emerging markets in South America and the Far East have, to a large extent, matured,” says Dermot Butler at Custom House, and, indeed, the BRICs (Brazil, Russia, India, China) have demonstrated this. Butler is still seeing substantial growth in emerging markets in Eastern Europe.

“The non-geographical expansion in markets has been almost totally related to the growth in managed accounts and managed account platforms,” says Butler, echoing Butterfield Fulcrum. “We have seen managed account platforms for several years now but the demand post-Madoff, for managed accounts has been quite dramatic.”

John McCann at Trinity expects the US to remain the epicentre for assets in the hedge fund industry. He sees Europe and the Asia-Pacific regions as the growth areas at the moment. McCann thinks growth in Asia will impact fund administration services in future and believes most administrators will need to be present in the region.

The major growth opportunity for administrators over the next 12 months will continue to be the US self-administered funds, predicts Oliver Scully at Citco. “Market share is still largely US- and Europe-driven with funds managed and operated in emerging markets still a relatively small portion of global assets under management,” he notes. 

Hans Hufschmid at GlobeOp sees demand accelerating for risk analytics, metrics and reporting that provide more in-depth portfolio risk data to fund and risk managers, investors and managed accounts. “We believe there is a strong opportunity to leverage our expertise in data centre management and hosting services,” he confirms.

The key growth markets are the emerging markets of Asia and South America and (pre-Dubai World) the Middle East, according to Paul Stillabower at HSBC Securities Services, taking a slightly different view to others.

He agrees, however, that this growth still has some flow into Europe, in particular Ucits funds into Luxembourg. “The growth in emerging markets is the main overarching factor which is driving strategy in the securities services business, since every firm has seen the long-term demographic trends and therefore knows that the US and, to a lesser extent, Europe offer lower growth opportunities,” notes Stillabower.

Joseph Truelove at Kleinwort Benson is seeing new funds being launched with investment in the UK, the Middle East and the former Soviet Union.

Over the last 12 months, Martin Tolcher at Legis Fund Services has seen enquiries for real estate, private equity/venture capital and Shariah compliant fund structures.

Jonathan White at Viteos Fund Services says Mauritius, UAE, South Africa and Asia (Singapore) are the emerging markets.

Apex wants to be based where its clients are “so we can know exactly what they want and tailor our services to meet those expectations locally with staff speaking their language and working their working week,” says Peter Hughes. The growth of emerging markets has led Apex to open offices in China, Hong Kong, Singapore, Mauritius, Dubai, Bahrain and Saudi Arabia.

He says if there are enough fund managers in an emerging market, Apex will consider opening.