Andrew Collins outlines recent developments at Butterfield Fund Services, including the appointment of a new Director of Marketing for Europe.
HW: What is the size and scope of Butterfield Fund Services?
AC: In total, Butterfield Fund Services (BFS) has assets under administration of USD 51 billion, of which USD 36 billion are hedge funds. Butterfield Fund Services specialises in providing third party administration for offshore funds in four jurisdictions - Bermuda, the Cayman Islands, Guernsey and The Bahamas.
We provide full administration services to over 750 mutual and hedge funds and act for a number of the world's leading investment management groups.
HW: What was the scale of growth at Butterfield Fund Services in 2004?
AC: Butterfield Fund Services grew significantly in 2004. Butterfield Fund Services began providing fund administration in The Bahamas in February 2004 following the acquisition of a business in the jurisdiction. Bermuda, Cayman and Guernsey all experienced strong growth throughout the year.
Total revenue for all our offices combined increased by 43% in the year ended 31 December 2004 compared with the prior year. Hedge funds increased at an even greater rate.
HW: What are the drivers of this growth?
AC: The drivers of our growth were essentially through growth in the funds and asset values of existing clients, new business and also our acquisition in The Bahamas.
Bermuda, Cayman and Guernsey all attracted healthy levels of business. All three jurisdictions have taken measures to make themselves more attractive to both fund managers and their investors. As a leading competitor in each of these jurisdictions, and with our increasingly pro-active marketing strategy, BFS continued to attract new business.
Cayman had a great year, despite being hit by Hurricane Ivan in September. The Butterfield Bank Group's business continuity plans were activated before the hurricane hit to minimise disruption to our clients and we have been pleased to see such a promising recovery in the financial industry there.
Finally, we benefited from the success and growth of our existing clients in all our jurisdictions. Our focus on service helps us retain our existing customers, and this benefits us as they grow.
HW: What trends are you seeing in terms of hedge fund capital flows in 2005 versus 2004?
AC: No marked trends emerged between strategies in the growth of funds under administration, but there was significant growth in fund of funds.
HW: As the hedge fund business grows, what is Butterfield Fund Services doing to keep up with it ?
AC: To keep pace with the burgeoning hedge fund industry, we are continually reviewing our all-round service and with the levels of growth experienced, BFS will be continuing to increase its capacity to ensure that we maintain high levels of service.
As we continue to focus attention on personal service, BFS is increasing its number of employees, which currently exceeds 200 people. Technology is also a critical component in our overall service delivery and this year we are further enhancing our valuation software to keep pace with global standards.
BFS Bermuda is seeking certification under SAS 70, which we are hopeful of achieving during 2005. This will give both our current and prospective clients additional independent comfort regarding the quality of our services.
HW: With increasing competition and consolidation in the sector, are you facing pressure on pricing of your services? How are you dealing with this?
AC: I believe that, with the rapid growth of the sector and the difficulty for the whole industry of retaining and increasing staff with relevant industry expertise, our clients are aware of the critical role we play in their success. We do not anticipate significant pricing pressure in the near term.
HW: What are the key challenges facing hedge fund administrators in 2005 and beyond?
AC: There are different pressures and challenges in different parts of the market. The existing challenge posed by the speeding up of the investment process, as a result of the expectations of retail and institutional investors, is likely to continue.
In the longer term it remains to be seen whether the model of using the prime broker as the administrator is an appropriate model for the industry.
HW: What are we likely to see from Butterfield Fund Services in 2005?
AC: BFS will continue to consider developing its business in new locations, where its high quality service will be an advantage. This is in line with the Butterfield Bank Group's on-going strategy of growth in its core businesses and services.
BFS has also begun to develop a more strategic, co-ordinated marketing and business development drive in Europe, the Caribbean and America. BFS offers a great service and aims to be pro-active through networking with lawyers and fund managers active in the global financial centres, who are seeking value added partners to develop their international business.
To this end, in September 2004, we appointed Tania Kowalski as AVP Marketing in BFS Bermuda. Hal Masters, the previous Managing Director of BFS Bermuda works as a marketing consultant in both the US and the UK and this year we appointed Tim Shave as Director of Marketing for BFS in Europe, based in London at our Butterfield Private Bank business at 99 Gresham Street. Tim's appointment is a critical move as we see the hedge fund industry in Europe continuing to grow at a rapid pace.