The resources challenge
Ireland's continuing growth as a servicing centre for hedge funds is being driven by the desire of managers to have their funds serviced by blue-chip administrators with strong balance sheets, industry pedigree and experienced employees. This means Dublin will continue to be the jurisdiction of choice for many managers. There is no substitute for experience and this is especially true for administering complex strategies and structures.
It's no secret that service providers in Dublin are facing issues such as skill shortages and rising personnel costs. Fortis has responded by improving internal processes to create more efficient operating models, together with greater automation. In addition, a number of administrators have opened offices outside Dublin, to tap into greater availability of skills and enjoy lower costs. The Fortis office in Galway benefits from an extremely stable local labour pool and negligible employee turnover.
Hedge fund administrators also are looking to technology to boost efficiency and to some extent alleviate the need for extra staff, as well as to meet new client requirements. Online reporting for managers and their investors continues to be a major area of focus for larger institutional managers, but any technology that aids automation and decreases NAV turnaround time without significantly affecting cost will be increasingly vital for administrators in the future. Automation of previously manual tasks such as pricing and reconciliation undoubtedly relieves pressure on human resources, but an appropriate level of human oversight and sign-off by suitably qualified individuals is still required at each stage in the NAV process. Technology can relieve
some of the pressure, but no administrator can do without high-quality staff.
As a global leader in hedge fund administration with operations throughout the world, Fortis has the ability to draw on the combined resources of its network to service clients wherever they may be. Where clients require daily NAVs on a T+1 basis, Fortis is able to utilise its common global operating platform and take advantage of differences in time zone to meet the client's required timeframes.
For example, Fortis's office in Curaçao performs the portfolio reconciliation and pricing element overnight on behalf of their colleagues in Dublin for a large client that requires daily P&L. The solution carries on continuously for the client, who receives a seamless service managed from the Dublin office.
The growth in the hedge fund industry is helping the large administrators to become bigger still, thanks in part to organic growth among existing institutional clients, whose funds are increasing in size through investment performance and fresh subscriptions. They are also attracting new fund launches and spin-outs from existing managers and proprietary trading desks, as well as winning mandates previously serviced by their competitors.
However, given the capacity constraints in the Dublin market, many larger players no longer have an appetite for small launches and lesser-known managers. There is still a steady flow of new business that may be under the radar of larger administrators but can still be serviced profitably by smaller players - hence the continuing emergence of start-up or spin-off administration firms. Fortis believes the Dublin market remains a robust choice as for large institutional quality hedge fund and fund of fund managers. The depth of experience in the labour market and recourse to human resources outside the capital, combined with a constantly evolving regulatory regime, will help Ireland remain a leading centre for the global hedge fund servicing industry.
Charlie Woolnough is director of business development at Fortis Fund Services
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