The boom in hedge fund investments, particularly from plan sponsors, has custodial banks, outsourcing firms and technology companies in a feeding frenzy, gaining expertise through acquisitions to boost market share.
"There used to be several niche players," said Bob Donahoe, managing director of BISYS Hedge Fund Services Ltd., New York, a unit of BISYS Group Inc. "There's been a move toward bigger institutional-type companies moving into the hedge fund administration space."
He noted that BISYS Hedge Fund Services was borne out of BISYS' acquisition of Hemisphere Management Ltd. in March 2002.
"Institutions see the hedge fund market — with total assets in the neighborhood of $1 trillion — as a market to get into," Mr. Donahoe said. "It's really a further extension of the services they're already providing."
Although it's an extension, it takes special skills that firms are finding easier to acquire than build.
Among industry deals:
• JPMorgan Chase & Co., New York, acquired Tranault Fund Administration Ltd. in July;
• HSBC Holdings PLC, London, acquired Bank of Bermuda in October 2003;
• Bank of New York bought Bermuda-based International Fund Administration Ltd. in February 2003; and
• State Street Corp., Boston, acquired International Fund Services in July 2002.