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Acquisitions fuel potential alternative asset growth

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U.S. Bancorp Fund Services LLC (USBFS) is finalising two significant integrations: AIS Fund Administration, which it acquired in 2012; and Dublin-based Quintillion Ltd, acquired in 2013. The two transactions combined added approximately USD43 billion in AuA to their existing business along with several organic growth opportunities.

“Our alternative investment fund AuA is approximately USD120 billion right now. Although not included in that AuA number, it’s worth noting that we are one of the leaders in administering liquid alternative mutual funds. There are approximately 500 liquid alternative funds and we are the full service provider to 150 of them,” comments Joe Redwine, President, U.S. Bancorp Fund Services.

While the firm has remained open to potential acquisitions to increase scale, in the last business cycle, most of USBFS’s growth has been organic. According to Redwine, the business has delivered a 5-year compound annual g
rowth rate north of 50 per cent. 

Three years ago, USBFS featured in the high 20s among hedge fund administration rankings. According to an industry survey, it is now ranked 15th in AuA among its peers. Redwine feels that breaking in to the top 10 is eminently achievable. “Our goal is to continue to improve on our industry ranking via a combination of acquisitions and organic growth.” 

“Many fund managers are far from parochial these days, and often will offer numerous investment products worldwide. Knowing this, our overall strategic goal is to be a full-service provider to virtually any and all commingled products,” says Redwine. 

USBFS is ideally positioned to extend its capabilities, not just in hedge fund administration, but in all alternative asset classes. Historically, it has forged a leading position in servicing registered funds. It has been operating in the mutual fund space since 1969, and applying that expertise to hedge funds was a logical decision made 15 years ago.

This is especially true given that one of the key business lines at U.S. Bancorp is Securities Services. U.S. Bancorp Fund Services sits within the group that includes Institutional Trust and Custody, Global Corporate Trust Services and Trust Technology and Support Services. 

“Our Global Corporate Trust Services is a top tier trustee in all products. Most important, as it relates to USBFS, they are ranked number 1 in the CLO category, both here and in Europe. We share a lot of clients in the credit space and there is a lot of synergy between our two business lines, benefiting existing clients and leading to significant new business opportunities,” says Redwine.

He notes: “The Quintillion transaction is critical to our overall growth plans. When we look at Europe, as with any other region outside of the US, the question we face is ‘Do we build or buy?’ We’ve done a number of acquisitions over the years, in both the registered and unregistered space, and the cultural fit we achieved with the Quintillion acquisition is as solid as we’ve experienced.”

The pressures of Basel 3, an increased focus on ROE and maintaining profitability: while these are pinch points for some bank owned administrators, they’ve become points of differentiation for USBFS.

“U.S. Bancorp, our parent, has the highest return on equity among our peer group, we have the highest return on assets among our peer group, and we also have the best efficiency ratio. What we have built is a strong, streamlined business model to the benefit of our clients and partners,” concludes Redwine. 

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