Disclosure regulations in the U.S. and Europe have helped boost business for hedge fund administrators in the first six months of this year, with single-manager assets under administration increasing 13.3% to $3.411 trillion as of June 30, according to a survey by eVestment LLC.
Also helping drive the increase has been organic growth of firms, particularly those among the top 10, and overall hedge fund performance, said Peter Laurelli, New York-based vice president and head of research at eVestment.
State Street Corp. (STT)'s alternative investment solutions group had the highest total hedge fund assets under administration for the first six months of the year among the 38 single-manager administrators surveyed. The State Street unit had $682 billion in AUA as of June 30, up 8.7% from Dec. 31; followed by Citco Fund Services at $532 billion, up 5.35%; BNY Mellon Alternative Investment Services, $445.75 billion, a 25.56% increase; SS&C GlobeOp, $395 billion, up 20.43%; and Citi Hedge Fund Services Ltd., $243.48 billion, up 15.41%.
The impact of Form PF in the U.S. — requiring hedge funds with more than $5 billion in assets under management to disclose holdings and investor information — and similar rules through the European Union's Alternative Investment Fund Managers Directive, has been a boon to the biggest administrators, Mr. Laurelli said. He said the regulations on hedge fund managers make reporting “too daunting to go it alone. You have to get it right, and it has to be done on time. That technology burden has been laid on the administration industry. I think they're happy to be leaned on as a partner.”
Mr. Laurelli said larger administrators benefit more than those with less scale because they can handle the added cost of regulatory monitoring. “It's much harder for smaller firms to do because of the cost,” he said.
There were no shifts among the rankings of the top 10 fund administrators from six months earlier.
Among hedge fund-of-funds administrators, the percentage gain in total AUA was much less — only 2.9% for the first half of 2013, to $812.5 billion as of June 30. However, 13 of the 33 fund-of-funds administrators surveyed reported declines in overall AUA in the first half of the year. Respondents attributed the overall small gain to an increase in separately managed account business, chiefly from institutional investors. However, respondents continued to report AUA declines resulting from redemptions in pooled vehicles. Mr. Laurelli said regulatory requirements did not affect hedge fund-of-funds administrators. The survey did not provide asset breakouts for pooled or separately managed accounts.
BNY Mellon had the highest AUA among hedge fund-of-funds administrators, at $133.43 billion, up 2.48%, followed by Citco at $127 billion, the same as six months earlier; State Street at $103 billion, up 16.37%; SEI, $64.3 billion, down 1.38%; and Citi Hedge Fund Services, $51.57 billion, down 3.53%.
HedgeServ, Deutsche Bank Alternative Fund Services, SS&C GlobeOp, BNP Paribas Securities Services and Northern Trust came in sixth through 10th, respectively. The same firms were in the top 10 six months earlier, although Deutsche Bank and BNP Paribas swapped positions in the most recent listing.
BNY Mellon had the largest percentage increase in AUA among single-manager administrators, at 25.56%, while State Street saw the biggest gain among fund-of-funds administrators, at 16.37%.
The top five single-manager administrators represented 67.39% of total assets administered as of June 30, compared with 67.32% as of Dec. 31. The top 10 administered 87.35% of total assets, against 87.22% six months earlier. The top five hedge fund-of-funds administrators accounted for 58.99% of total fund-of-fund AUA, up slightly from 58.81%, while the top 10 represented 81.26% of AUA, a slight gain from 81.15%.