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Ted Jasinski, general manager of Admiral Administration’s Richmond-based office

Esoteric structures gain favour with US institutions

Interview with Ted Jasinski, Admiral Administration – The emergence of esoteric products such as private equity-type hybrid funds means the alternatives space is starting to get a whole lot more alternative, according to Ted Jasinski, general manager of Admiral Administration’s Richmond-based office.

“Where we as a firm have done well and where we’ve seen a lot of capital being raised is in these esoteric products,” he says. “The space is not too crowded and the endowments and institutions seem to like it.”

Over the past five years, Admiral’s US office has seen significant growth in both number of clients and assets under administration, with the biggest growth in assets coming from these private equity hybrid structures.

The reluctance for banks to lend is making life difficult for firms, who now need access to alternative funding channels. The ability of fund managers to step into the breach, building hybrid structures that can deliver steady returns with low volatility and that have no market exposure, is proving highly popular with institutions that need to find good yield.

“These hybrid funds are trading in anything from farm leases to patents and copyrights, royalties, aircraft leasing, even windmill leasing,” Jasinski says. “A group doing asset backed-lending that was our first private equity hybrid client three or four years ago has grown from USD50m to about USD600m. They’re still gaining traction.”

“These new structures really cater to the institutional market. They’re returning anywhere from 8 to 15 per cent per annum, higher in some cases. Banks are still cleaning up their balance sheets, so it’s a great environment for structured finance activity.”

Admiral is not targeting solely hybrid structures. The firm continues to bring on clients across the board; long/short equity managers make up the majority of its current pipeline. This is both good and bad news – good news in that new talent is continuing to come on stream, giving administrators the opportunity to partner with what might be the next billion-dollar manager.

But also bad news because, Jasinski says, “pricing has been so competitive that we’re being driven to levels approaching cost just to pick up some accounts in that space. You’ve got to bet on growth with these managers. Even the largest administrators are bidding for emerging managers.”

Admiral’s game plan is to get to 100 clients in the US market within the next few years. “By broadening our product line and having a diverse book of clients trading various asset classes and strategies, our goal is to be a complete admin shop that can service emerging managers as well as large and established alternative industry players,” he says.

So far this year the firm has landed two large accounts, one from HSBC, the other a USD300m long/short equity fund that broke away from Citi. Says Jasinski: “We’re proving we can compete with the big guys, yet at the same time provide a higher touch with our relationship model. To us, a USD3m manager is just as important as a USD300m manager.”

By taking on hybrid funds, Admiral has had to adapt its internal operations and become more flexible. Advent Geneva can handle complex instruments, entailing minimal adjustment from a portfolio accounting perspective.

“However, from a transfer agency side and reporting perspective, we’ve had to research and invest in new systems and allocate specialised accountants to handle customised waterfall calculations, systemised capital calls, valuation, etc.,” Jasinski says. “We now feel we can service any type of alternative product in the industry.”

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