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Hedgeweek Comment: Global needs drive fund services consolidation trend

Two Bermuda-based fund administrators, Fulcrum Group and Butterfield Fund Services, have announced plans to merge their businesses under the majority ownership of private equity group 3i.

Headquartered in Bermuda, the new company, to be known as Butterfield Fulcrum Group, will have around 400 employees in nine countries servicing nearly 1,000 hedge funds, fund of funds, private equity vehicles and institutional clients.

The Bank of N.T. Butterfield, the parent company of Butterfield Fund Services, will retain a substantial equity stake in the combined business alongside3i, which invested USD57m in Fulcrum in June last year.

While consolidation in the funds industry has been picking up for some years, the last 12 months has witnessed an acceleration of activity. But while many earlier acquisitions involved global banking groups acquiring expertise in fund services, recently the driving force has been to boost scale. Butterfield Fulcrum Group will have close to USD100bn in assets under administration, which will make it one of the 15 largest alternative administrators in the world.

The financial markets is seeing a renewed drive toward greater cost efficiency, which in the funds industry means essentially size and scale, and consolidation is driven more by global needs rather than local requirements. Globally, as financial institutions seeking to focus on core business areas, they will be ready to sell other activities - creating more consolidation opportunities.

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