Former senior executive at IQ-EQ Fund Services Luxembourg
- Regional outlook for new entity formation for players such as Alter Domus, discussing Ireland vs Luxembourg vs other jurisdictions
- Pricing trends and evolving scope of work, including impact of fund administration on growing SPV (special purpose vehicle) business
- Intermediary vs direct client acquisition trends
- Human capital cost trends, margin compression and optimisation
- Consolidation outlook, discussing Alter Domus and wider industry
Could you outline the structural drivers and qualities of the outsourced fund administration space?
Why has Alter Domus been more effective in winning fund administration business? I’ve heard before that TMF and Intertrust have had more challenges moving up the structure from the SPV [special purpose vehicle] to the actual fund itself.
Why is Alter Domus typically associated with alternative asset managers, so PE and real estate more so than hedge funds?
How strong do you think Luxembourg is vs Ireland for asset and investment managers? Could Alter Domus pivot to Ireland if it became more competitive, and if so, how quickly?
What’s the average life of a fund management contract?
How much pricing pressure are you seeing on new fund structure RFPs [requests for proposal] for new SPVs? You’ve obviously mentioned Apex and SS&C getting more competitive, so is SS&C actively trying to win work in the market now, or is that something you’re expecting to happen in the near future?
I know there’ll be a range as to the level of service and the complexity of the structure that the asset manager wants to established and the numbers of SPVs there. How do you think about the evolution of average revenue per entity or any other metrics in terms of the development of the industry revenue pool?
Why can’t the SPVs be administered by a local chartered accountant vs fund administrators such as Alter Domus or IQ-EQ? It’s usually the responsibility of the fund administrator to make all the important works.
What’s the risk to the asset manager of having a more open architecture for its fund and SPV admin?
Do you think any of the integrated fund admin and SPV administrators that are trying to grow in Europe – such as Apex, or SS&C at some point in the future – would consider giving the SPV administration away for a very low fee to acquire the asset manager’s fund business, given that seems to be stickier?
How much pressure do you see on EBITDA margins from competition? If you can make 30-35% EBITDA margins currently, do you see that going lower at all, and if so, significantly so?
Is the reduction from 80% human resources to 60% with the right systems margin-accretive, or does that just offset the inflation that we’re seeing in wages in the fund admin space?
How easy is it to implement the centre of excellence strategy? I feel like Intertrust has tried to do that, and this contributed to the churn the business saw. People were unhappy with this strategy.
Do you think it’s achievable for players to still be earning 35% EBITDA margins in the next five years? Could the willingness of some market participants to have sub-30% EBITDA margins lead to margins coming down to the 25-30% range as opposed to 35%?
Would you view Alter Domus as a sensible strategic acquisition for an SS&C if it has the technology platform but doesn’t necessarily have the European regulatory and administrative expertise?
Could Apex acquire Alter Domus, or is it too busy integrating other assets?
Are there any other interesting consolidation opportunities on the market that may make strategic sense?
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