By all available measures, Dublin continues to boom as an administration centre for alternative funds, and is attracting new setups of all alternative fund types from managers in jurisdictions throughout the world. The city has firmly established itself as the European centre of choice for hedge fund administration, providing a massive opportunity for administrators located in the jurisdiction.
This development is something that PFPC anticipated several years ago at the outset of growth in European hedge funds, and the company adopted a strategy designed to ensure that it would secure the maximum level of market share, based on the adoption of state of the art technology and offering the greatest possible breadth of services to the alternative investment management industry.
About two years ago, PFPC identified through a long due diligence process the best system platforms on the market to support this initiative, and adopted across the line of business Advent Geneva as its accounting platform, NTAS for its shareholder services, and a front-end system called Beecham for its new middle-office service, enabling it to offer hedge fund managers a full outsourcing solution. This move is part of a strategy that is being increasingly followed by administration providers as they move away from the traditional approach largely based on net asset value into the provision of trade support, execution, OTC processing and other back office-type support that allow fund managers to focus exclusively on trading and distribution of the fund.
Unlike a number of other administration providers in Dublin, PFPC decided many years ago to forego acquisitions and concentrate on achieving organic growth through the provision of integrated services to clients both in the alternative investments sector and in traditional fund administration. Although they are radically different areas with different processes and systems, the opportunity to receive integrated in-house services is a popular option for clients who operate in both asset classes.
PFPC attributes its success in winning a significant amount of business from European managers to having adopted the strategy of providing a daily control environment allied to best of breed systems. The more recent addition of middle office functionality has helped to keep the firm in the top league of Dublin administrators in terms of the increased sophistication of its product offering, which is clearly the direction the market is moving in.
It has also been one of the pioneers of a shift toward more frequent valuations, built on its experience both in the US, where PFPC is a very large player in the mutual funds industry, and in Dublin. On one hand investors are demanding increased transparency, and often find it unacceptable to have to wait up to 10 days after monthend before they receive the fund's NAV. At the same time many large managers want inhouse systems that reconcile their fund records with their portfolio systems, not monthly, not weekly, but on a daily basis.
Adopting a daily processing control environment for hedge fund administration has proved a very radical product offering. While traditional administrators still tend to be month-end focused, PFPC has taken a completely different approach, which means as a matter of policy reconciling all positions and cash in its funds to custodians and prime brokers on a daily basis. As a consequence, NAV can be turned round in a very rapid timeframe at month-end.
By Mark Mannion - managing director of PFPC International