Managing growth in a fast-changing market
Once upon a time, when hedge funds were all either global macro or long/short equity, their administration was relatively straightforward, and gearing up for growth in business simply meant hiring more fund accountants. But in a world of ever more exotic financial instruments and increasingly complex and sophisticated strategies, administration itself has become a more cutting edge business and the skills that are employed in it include some that you might not expect.
It is in response to this development that BISYS Hedge Fund Services has examined its business, broken it down into core competencies, and matched them to different disciplines. Traditionally there has always been the fund accounting group, investor relations group and the legal and corporate secretarial group, but now there are specialists within those groups who focus on complex instruments or the preparation of financial statements.
Instead of just looking for accounting skills, the firm has in recent years gone out to hire graduates with mathematics backgrounds, engineers - and even one astrophysicist. This means it is no longer competing for staff only with other fund administrators but with audit firms, banks and investment houses.
Although BISYS is one of the largest administrators in Europe, with 350 staff in Dublin, it actually has a relatively small client base. When the firm opened in Dublin in 1998, most European hedge funds were long/short equity products, and their managers consisted of two men and a dog in Mayfair. Today these clients have added new instruments, strategies and funds, and they may have as many as 100 staff. They have grown organically, and BISYS has grown alongside them.
As these clients have grown their businesses, adding new products and strategies, BISYS has also had to evolve in order to meet their changing needs. This requires recruiting staff with different skill sets. An engineer wouldn't have worked in fund administration when it involved simply booking trades and net asset values, but today they are pulling pricing models apart to find out what's happening with the instruments that funds trade.
BISYS was one of the first administrators to service funds dealing in markets such as credit default swaps, carbon emissions, freight and shipping derivatives. When these new instruments first appear on the market, no administrator can boast specific expertise in servicing them, so what counts is having a proven track record of flexibility and evidence of ability to rise to the challenge when clients have moved into new and innovative types of product.
Being able to call on people from different backgrounds and disciplines is helpful when a new client appears or a new product comes on line. By its very nature the industry is one that experiences rapid change, but that is something that the BISYS operation in Dublin has been used to throughout its existence.
Today a new client may be thinking only of a long/short equity fund, but they might want to get into credit or special situations within two or three years. What they will ask a firm bidding to provide administration is not whether it can service that long/short product, but whether it will be ready a couple of years down the line to take on the special situations fund. The winners in the market of tomorrow will already be able to give a confident yes.
Karen Tyrrell - managing director of Bisys Hedge Fund Services in Dublin
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