By Suchita Nayar
In the first part of a two-part focus, Hedgeweek examines the factors that are driving expansion at LaCrosse Global Fund Services, which was launched in January.
A vacuum has developed in the US hedge fund industry as fund administration services have fallen behind the rapid-fire growth of their customers. With a handful of exceptions, administrators get poor to failing grades for service, timeliness and technology sophistication. For industry veterans Stuart Feffer and Christopher Kundro, who head LaCrosse Global Fund Services, that represents a perfect business opportunity.
LaCrosse is one of a number of prominent firms that have started offering fund administration, middle and back office services to hedge funds. Backed by agricultural and food industry giant Cargill, the New York-based firm opened for third-party business at the beginning of this year. In a business where size matters, LaCrosse launched with 160 employees in 10 offices across nine countries, and plans to reach 200 by year-end.
'LaCrosse entered the market as a sizeable, independent provider of operations, middle office and administration services,' says Feffer. 'LaCrosse leverages Cargill's shared services related to systems that enable us to increase our operational capacity when required. In addition, we take advantage of Cargill's geographic reach and global knowledge.'
Thanks to its solid pedigree and large physical footprint, demand is soaring. Assets under administration are around USD9bn from clients in Asia, Europe and the US. For nearly two decades, the only client of the administration business was Cargill Global Capital Markets, which became Black River Asset Management in 2003.
Cargill spun LaCrosse out in January this year in order to sell its numerous services - including portfolio valuation, facilitation of custodian and prime brokerage communications, trade-settlement, processing of over-the-counter derivatives, and management of cash and collateral, accounting, and reporting - to third-party clients.
The firm services assets ranging from traditional bonds and equities to intricate financial instruments linked to commodities, debt, fixed income, foreign exchange and interest rates. It promises key reports, including profit & loss, by 6.30 a.m. local time, anywhere in the world.
Along with services, clients are also looking for dependability, according to Feffer and Kundro. 'The fund administration business has a reputation of over-promising and under-delivering,' Kundro says. 'Client service is viewed as poor to non-existent. Before launching LaCrosse, we made significant investments in our infrastructure to ensure we can deliver what our clients need, where, when and how they need it.' An additional spur is that Cargill expects LaCrosse to meet its commitments to safeguard its own reputation.
In a crowded marketplace, LaCrosse aims to stand apart by taking charge of all non-prime brokerage processing and accounting functions, allowing the manager to focus on raising and managing money. It is capable of processing, accounting and valuing esoteric asset classes, such as private equity, distressed debt and private credit instruments, and offers the ability to service trades in 50 established and emerging markets around the globe on a single integrated technology platform.
Before joining LaCrosse, Feffer and Kundro jointly led BearingPoint's wealth and investment management practice and Capco's private client and investment management business. They have worked together for roughly a decade and are best known for their work in setting up hedge fund platforms and studying operational risk and valuation practices.