State Street's liquid alternatives financing and servicing capability is well positioned to support asset managers, both traditional and alternative, who are looking to diversify their product range. It has built a state-of-the-art global platform that provides fully integrated reporting, compliance, accounting, custody, settlements and investment analytics.
"Our perspective is that the liquid alternatives opportunity is huge, both for our clients and ourselves. Assets are now over USD700bn, asset levels have doubled over the last five years and projections are that liquid alternatives could become 10 to 15 per cent of total global mutual fund assets.
"Strategically, our goal is to give asset owners and asset managers all the tools they need to support their liquid alternative products," says Robin Sarkar (pictured), Senior Vice President – Liquid Alternatives Product Specialist at State Street Corporation.
From a US perspective, State Street is now the largest third party administrator of liquid alternative services based on assets. It services just over 50 per cent of the marketplace, including 15 of the top 25 liquid alternatives funds.
This year, the firm has won a number of important client mandates from US-based fund managers including American Century, BMO Harris, Neuberger Berman and New York Life Investment Management.
According to Sarkar, there are four elements to State Street's platform offering that are important to its clients. The first is its proprietary technology and service capability for liquid alternatives. The global platform provides a full end-to-end suite of back-office services, allowing it support the myriad needs of '40 Act funds and UCITS funds.
The second element is thought-leadership. "We are always looking to deliver value to our clients. We generate a monthly newsletter on global liquid alternative trends, product launches, changes in regulation, in distribution channels etc. We meet regularly with asset owners and asset managers, fund promoters, distributors. That commitment to thought-leadership is a key differentiator for us as a firm," says Sarkar.
The third element pertains to its support of start-ups. State Street offers consultative services ranging from general liquid alternatives education, operational flow analysis, to preparation of regulatory and legal documents. "We're able to leverage an experienced and dedicated management team. They have a wealth of expertise and their role is to drive the launch process, in conjunction with the fund sponsors, to ensure it is successful in as short a window of time as possible. That operational support and guidance is offered on an ongoing basis," confirms Sarkar.
The fourth element is State Street's service model, providing investment managers with a turnkey solution.
"What I mean by that is two things: firstly, we allow the hedge fund manager to operate in their established operational ecosystem. Second is the ability to bring other value-added services to the table to deliver a customised solution to our clients.
"Those include risk analytics, collateral management services, OTC derivative valuations. Because of the complexity of the products, managers and asset owners are looking for as complete a solution as possible from their service provider," confirms Sarkar.
The growth in liquid alternatives shows no signs of abating and is a trend that's here to stay in Sarkar's view, noting that there has been "a big upswing of interest in multi-alternatives recently – i.e. multi-manager, multi-strategy products".