With the wave of global uncertainty refusing to depart anytime soon, many in the financial services sector are restructuring and rethinking their strategies.
With the wave of global uncertainty refusing to depart anytime soon, many in the financial services sector are restructuring and rethinking their strategies. While many focus on cutting costs and identifying new capital, one point that is key presently is the reliability, commitment to the business and steadfastness that can be provided by experienced partners and advisors.
From a funds’ perspective, it is essential to note that larger service providers might have an edge over their smaller counterparts. Hedge fund administrators face tough technological challenges as they compete to provide services in this demanding sector. As the hedge fund industry grows more complex, having the right technology and expertise in place is critical to a successful servicing relationship. Furthermore, size, accessibility and backing from an institution with a long-standing history of success can be advantageous in terms of being better equipped to deal with outside factors in an uncertain time.
Even within the hedge fund investment sector, we are seeing a lot of consolidation – with bigger entities buying out small and boutique funds or with two entities merging to form a bigger group. By consolidating and becoming larger, these new groups can diversify risks and have a solid and bankable support system.
In today’s world, the real differentiators are timeliness, accuracy and consistency. What is required from those providing fund services is quality of service, which means being able to contact and obtain a comprehensive answer from someone empowered to change and fix things, as well as execute these changes in the proper way.
As an example, State Street reinforced its commitment to the hedge fund business and focus on institutional investors when it acquired International Fund Services (IFS) in 2002 and Investors Financial Services Corp. in 2007 (IFIN). These strategic acquisitions added to our existing strength internationally, especially in Ireland.
Established institutions provide opportunities to expand our clients’ businesses globally and into high-margin service opportunities. We can offer wider access to markets and more value-added services. In addition, clients can feel an additional level of comfort knowing their provider is committed to the business and will be there no matter what the market conditions.
In Ireland, State Street is one of the largest employers in the International Financial Services Centre (IFSC) in Dublin with more than 25% of the total IFSC employee population. As the largest fund administration organisation in Ireland, State Street now employs more than 2,000 people across all of Ireland.
Further consolidation is bound to come as global players seek to increase their capacity and capabilities, and the smaller players look to survive. As hedge fund assets and the associated transfer of information become more complex and as the regulatory environment changes, funds and fund service providers will need to keep up. We are, after all, in one of the most dynamic industries of the new world.
Gary Enos, executive vice president, State Street
