Fund Administration Sector Is Attractive

The recent purchase of a Jersey-based fund administrator by a UK buyout firm is a good example of how fund administration is an attractive sector for buyout.

The combined group will now have access to clients in Asia and the Americas through the fund administrator’s offices in Tokyo and Bermuda and will offer a full range of fund administration services, including fund structuring, due diligence and authorisations, alongside fund valuation and accounting.

As managers are increasingly looking to outsource administration because of increased regulation and because they prefer a ‘one stop shop’, buyers are eyeing the sector with interest for its buoyancy.

Currently, the most significant piece of legislation affecting regulation of the industry is the Alternative Investment Fund Managers Directive (AIFMD), which is in the process of being implemented across the EU.

The AIFMD governs how investment firms manage and market alternative investment funds in Europe and its key policy positions will impact on the boards of investment trusts.

Some could opt to become self-managed but the Financial Services Authority’s (FSA) policy positions make the benefits of doing so less evident and the FSA appears to limit the ability of investment trusts to become self-managed to those who do not appoint external managers and employ staff.

In the UK, the fund administration industry received a boost when the FSA recently released its level one guidance on implementing the Directive, stating its preference for allowing administrators to offer depositary services, which include cash monitoring and asset safeguarding, alongside banks.

The FSA’s move is an important step towards the implementation of the Directive into UK law, although the level two regulations have yet to be released and there will be some important clarification included within those, particularly for smaller firms.

As an accountant, Philippe Herszaft specialises in offering advice, support and guidance in regard to business acquisitions and mergers.