Specialist
Senior executive at Alter Domus Luxembourg Sàrl
Agenda
- Outlook for SPV (special purpose vehicle) volume creation in a recessionary environment
- Durability of new SPV formation in the context of BEPS (base erosion and profit shifting)
- Revenue per entity trends and outlook for corporate services pricing
- Competitive positioning in fund administration, focusing on Aztec Group (WA: AZC) and dynamics around AIFMs (alternative investment fund managers)
- Impact of automating back-office operations and cost base implications, plus human capital cost trends and retention
Questions
1.
How much activity are we seeing on the fund formation and SPV [specialist purpose vehicle] formation side, given the volatility in the macro backdrop?
2.
What’s the long-term trend in terms of new fund starts in the PE space?
3.
What’s a reasonable growth rate estimate in new fund starts? Are we talking single digits? Is it as high as double digits YoY?
4.
For a normal service provider in a given year, how do you generally think about the split between fee revenue coming from the existing book vs new business or incorporations?
5.
How do you think about the typical number of SPVs per fund? I appreciate there’s no typical fund, but are there any general rules of thumb?
6.
When you look at fund starts and SPV formation, how do you think about the split in terms of Luxembourg, Ireland, the Channel Islands and so on?
7.
Roughly what market share would you give Luxembourg as the prime jurisdiction in Europe for alternative asset management?
8.
Do you see Ireland’s market share changing? Presumably, Ireland can and will follow suit in terms of creating the environment you mentioned. What would be the catalyst for volume to shift to Ireland?
9.
How much of an impact do you view BEPS [base erosion and profit shifting] having on new SPV formation, particularly on the corporate side where they’re obviously using it for structuring their holdings or for tax optimisation?
10.
Roughly what portion of SPVs do you think are attributable to big corporates, perhaps in terms of starts?
11.
What are the benefits to investors of using SPVs?
12.
Where is Aztec stronger or less strong? Where are the company’s core competencies?
13.
How easy is it to address a lack of experience on the SPV side?
14.
Will funds generally want the fund to be serviced by the same organisation that’s servicing the SPVs, where possible? Is there an advantage to having them separate?
15.
Do you think it’s easier to move down the value chain, as opposed to moving up, so coming from the fund admin relationship and acquiring the SPV business of that fund? Or is it easier to move from a background in SPVs to acquiring fund admin business?
16.
Why do you think Intertrust and TMF Group haven’t had more success moving into the fund admin space?
17.
What impact would you expect to see from North America-based companies trying to move into Europe and establish more of a presence there?
18.
How much success do you think North America-based companies will have growing in Europe? The major players in Europe are largely European at the moment, the biggest ones anyway. How quickly do you think somebody such as SS&C could scale a business?
19.
Given the Aztec business apparently has background on the fund admin side of things, how balanced do you think it is now between fund admin and SPV?
20.
Is it possible to acquire or integrate Aztec and TMF? Would that work?
21.
What are the typical SPV services offered by the providers you mentioned?
22.
Do you think the EBITDA margins you mentioned are durable? You said the whole space is around low-to-mid 30s. Do you think that’s a sustainable margin level, given some of the headwinds on the pricing side for SPVs?
23.
Are there synergies around having the vertical integration, from a cost perspective? Can you get the same people to do the whole thing, or do you need different people?
24.
You mentioned how clients would typically look at the total cost of serving the fund. Are there any rules of thumb as to how much a fund would like that to cost? Do they think about this in absolutes or relative to the assets in the fund?
25.
How much of the fund’s revenue would be coming from non-standard services or additional time spent? How front end-loaded is it from an incorporation perspective? Do you then not have to do much over the life of the fund?
26.
You mentioned AIFM [alternative investment fund manager] and depository services. How good is Aztec at those? The company advertises that as something it can do.
27.
Who are the biggest names in AIFM? Are people providing those services today or not?
28.
How much flexibility does the cost base typically have for the service providers?
29.
What portion of the cost base do you think would be human capital for the service provider types we’ve discussed? Is 80% a reasonable benchmark?
30.
How does the portion of the cost base that’s human capital scale as assets, number of funds being administered or number of vehicles being administered increases? It’s not going to be one for one, but there’s presumably quite a strong correlation between the number of people you need and the number of vehicles you’re administering.
31.
If you were a software salesman serving the fund admin industry world, what are you likely selling?
32.
Would the solutions you mentioned likely be bought in and paid for or developed in-house? Do any players in the space have the ability to build these tools?
33.
Is it a realistic prospect that the corporate services and fund administration industry might agree on a standard?
