Trends in Hedge Fund Administration

August 2, 2006

Abstract

New York, NY, USA August 2, 2006

Hedge funds are increasingly outsourcing, and the hedge fund administration business is flourishing.

A major transition is occurring in the hedge fund administration market. Services are expanding from fund administration庸und accounting, NAV calculation, secretarial services, and investor relations, to name a few葉o full business process outsourcing, according to the new Celent report, .

The potential growth is looking good for the 70 hedge fund administrators across the globe. Leading the pack of administrators, as measured by total assets under administration including direct hedge funds and fund of funds, are CITCO, HSBC Alternative Fund Services, and Fortis Fund Services.

Hedge funds continue to astound the market with double-digit growth rates and global demand. As a result, there is always more business for hedge fund administrators. Based upon Celent analysis of data from Hedge Fund Research and EurekaHedge, the global hedge fund market is approximately US$1.3 trillion in assets and is expected to reach US$2.38 trillion by 2009, an annualized growth rate of 17%. European hedge fund assets will significantly increase their share of the global hedge fund market, rising from 27% in 2006 to 35%; assets will rise from US$397 billion to US$835 billion. Asia's market share will increase from just under 5% (US$74 billion) to 9% (US$215 billion). All of this is good news for hedge fund administrators.

The hedge fund administration business may be heating up, but increased competition has yet to lower prices. "As the competitive front garners large firms with deep pockets, it would be natural to see price declines. But not necessarily," says Denise Valentine, senior analyst and author of the report. "Most of the pricing matrices are as complicated as the alternatives business itself. The ancillary services blossoming in the HFA offering allow for a multitude of pricing matrices."

This report explores outsourcing in the hedge fund industry and its impact on the evolution of hedge fund administration. Also included is a ranking of hedge fund administrators and detailed statistics on the hedge fund and fund administration markets.

The 36-page report contains 12 figures and 4 tables. A table of contents is available online.

 

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

New York, NY, USA August 2, 2006

Executive Summary 3
Introduction 4
The Crowded Provider Market 6
  Acquisition Activity 6
  Broadening Base of Providers 7
Hedge Fund Administrators 9
  Administrator Rankings 9
  Expanding Services 12
  Fund of Funds 14
  Pricing Structures 14
  Organization and Staffing 16
  Offshore Administration 17
  Technology 18
  Business Risks 21
Global Hedge Fund Overview 27
  Global Market Sizing 27
  Rise and Disperse: Industry Globalizes 28
  Regional Growth and Country Rankings 32
Conclusion 34
Objectivity and Methodology 35

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