Fund administrators are expanding into infrastructure as asset owners move more money into the asset class.
Sources said the potential for huge amounts of institutional assets to be invested in infrastructure — currently handled with private equity investment administration — could make it possible for the asset class to be handled in a stand-alone administration business, much like in private securities, hedge funds and real estate.
“Without a doubt, the stars have lined up,” said Cesar Estrada, senior managing director, head of private equity, directs and hybrids, North America, at State Street Alternative Investment Solutions, New York. “There's a demographic shift, more interest in yield, investor sophistication — all of that is coming together. Ultimately, more successful managers must make a choice to build their (infrastructure) business, and that gives new opportunities for fund administrators in this space.”
Infrastructure is “the next big thing. It's being developed as we speak,” added Jack McDonald, president and CEO at third-party fund administrator Conifer Financial Services, San Francisco. Mr. McDonald said he can see a separate infrastructure fund administration business happening in the future.
“(President-elect Donald) Trump's signaling of new infrastructure projects signaled a bellwether that a lot of assets are going to be going into infrastructure over the next several years,” he said. “A lot of discussions are happening now in fund administration that didn't happen a year ago.”
Conifer, with $115 billion in assets under administration, is being acquired by software developer and third-party administration provider SS&C Technologies Holdings Inc. Windsor, Conn., in a deal announced in December. SS&C has plans to leverage Conifer's expertise in private equity to broaden its infrastructure capabilities in fund administration as well as in software development, said Rahul Kanwar, SS&C senior vice president, managing director of alternative assets.
“We want to create infrastructure technology services that can process through cloud-based tools and are agnostic as to how the client uses them,” said Mr. Kanwar. “We also have systems on the fund administration side to process these investments, using experts in the field in private equity to apply to infrastructure assets. Conifer helps in this strategy.” He said SS&C is “creating a dedicated group” for infrastructure fund administration, both with software development for money managers and asset owners, and with a dedicated fund administration business that has $1.1 trillion in overall assets under administration.
“There is some overlap with other businesses, but there are more unique qualities with infrastructure,” Mr. Kanwar said. “For one thing, there are the nuances of the assets themselves, their complexity. There are the different forms or structure of making infrastructure investments, from direct to a club-type situation akin to private equity co-investment opportunities, to traditional commingled funds.”