Fri, 25/11/2005 - 06:17
Joost Lobler outlines the global development of Fortis Prime Fund Solutions, with funds under administration growing at over 40 per cent this year.
HW: What is the size and scale of Fortis Prime Fund Solutions?
JL: We have over USD 200 billion in assets under administration, and we operate from 12 offices around the world.
HW: Where are your key administration centres?
JL: We have three main fund administration centres: Europe (Dublin/Isle of Man), Western Hemisphere (Cayman/Curacao) and Asia (Hong Kong).
Dublin is our head office, where we have over 200 staff and we are one of the larger administrators in the country. We have around USD 35 billion under administration there and it has the Isle of Man as a subsidiary. We have a dedicated "hedgefund" bank in Dublin as well, where we book all our finance deals.
The data input is conducted on a global, 24-hour system, moving seamlessly between the three "hubs" and the three time zones.
Between these three locations, we offer all services and structures for the alternative investment industry, from custody to finance, from banking to administration.
HW: What has been the rate of growth in the regions in which you operate?
JL: We have grown considerably, partly on the back of the growth of the markets in Asia, in Europe we have grown ahead of the market and in the US we followed the market, and we have also grown on the onshore side in Luxembourg.
In all we added USD 60 billion in funds under administration over the last year, representing a growth rate of over 40 per cent.
HW: What is driving this rate of growth?
JL: The hedge funds market in Asia is growing rapidly, at a rate of between 45-50 per cent. Growth is being seen both in fund launches and in the inflow of money into Asia. We also see the resurgence of the Japanese market, where they are focused on global macro and long short equity strategies, in short, conservative strategies aimed at the institutional investors who are driving the Japanese hedge funds market.
HW: Who is setting up these new funds and what structures are they using?
JL: They are a lot of independent hedge funds being launched in Asia ex-Japan, run by people such as ex-traders or spin-offs from larger companies.
In Japan, the most popular structure is the Cayman trust administered in either Dublin or Hong Kong. Outside Japan, it can be local, such as Hong Kong or Australian onshore funds, and Australians use mainly Cayman or BVI structures for their offshore funds.
HW: What trends have you seen in Luxembourg over the last year in terms of new activity?
JL: We have seen some interest in the Luxembourg domicile. It is a tough competitive environment, but we have signed on a number of larger clients by offering a high level of service and also achieving a reasonable margin.
HW: What differentiates you from your competitors?
JL: We are not purely a fund administrator, we are also a major bank, so we can offer financing as well. We can offer our clients access to the bank and a whole range of financing products, not just leveraged products or bridging finance, through one channel.
On the funds of hedge funds front, we are part of a small group of 6-8 banks that offer leveraging facilities. Unlike our competitors, we offer this mostly in the form of a cash loan instead of doing it through a synthetic structure such as a total return swap or an option.
On average it is a bit cheaper and it does not tie-in the client. If they use a synthetic structure they are usually tied on for some years - we don't tie clients in, and we can do this on a daily basis, without any restrictions on use.
We started offering this facility around five years ago and it has been very popular with the funds of hedge funds.
HW: What about banking services to single hedge funds?
JL: Typically for single hedge funds, you need to have their assets pledged to you. The assets of a hedge fund are usually pledged to the prime broker, so the only way we can service this market is by being a prime broker ourselves, and we do this right now only for smaller hedge funds in the USD 50-150 million range, because our prime broker capacities are not yet comparable with the larger players.
HW: Some of the larger hedge fund players are now looking at private equity transactions, how are you dealing with this move on the administrative front?
JL: We deal with it on a case-by-case basis. If we can obtain an independent pricing from an independent party such as a property agent or Standard & Poor's we will deal with it, otherwise it is very difficult for us.
HW: Finally, looking at broader challenges to the industry, what are your views on regulation?
JL: On the positive side I think that regulation in the US will eventually lead to a requirement that every hedge fund operating there should have an independent external administrator, which good for us and also good for the investor because NAVs will be independently priced, raising confidence in the hedge fund product.
In Europe I don't see a lot of major changes very soon. Although there are calls for more transparency, specific data is available to view under agreements between the funds and their investors - we are already as transparent as our clients want us to be. The European financial authorities have not yet formulated a common view on an approach of this market and I expect that to take at least two years more.
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