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Asian industry growth drives admin challenges

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More than 50 new alternative funds were launched in Asia in 2007, raising USD5bn in assets, and the continent’s hedge fund industry saw total assets under management rise by just over 20 per cent –

More than 50 new alternative funds were launched in Asia in 2007, raising USD5bn in assets, and the continent’s hedge fund industry saw total assets under management rise by just over 20 per cent – a performance that would have been even more impressive but for a substantial outflow of capital from Japan-focused funds.

The industry is benefiting from a can-do culture steeped with optimism. Huge demand exists for the relatively small, but highly talented pool of fund managers in Asia, as large North American and European hedge fund managers continue to seek exposure to the Asian market and capture its impressive returns.

Many of these North American and European managers are launching their own Asia-focused funds, backed by the establishment of a regional presence. Singapore has seen significant growth in the number of hedge fund launches and is gaining ground on Hong Kong, the historically favoured location for the industry in Asia.

Competition in the alternative fund services sector is hotting up in response to the industry’s growth over the past few years. Several European and US hedge fund administration providers have recently extended their coverage to Asia by setting up operations in the region.

However, administrators have also found themselves in competition with investment banks, which are hoping to anchor their relationships with managers by providing back office services as well as traditional prime brokerage offerings, and several of the smaller fund administration companies have been acquired by the global banks to accelerate their entry into the fund services sector.

Fortis Prime Fund Solutions is well placed to take advantage of this dynamic and fast-developing environment, having provided services to hedge funds in Asia for almost 20 years and built up one of the largest administration and alternative fund financing operations in the region, spanning Hong Kong, Singapore and Tokyo.

One of the challenges for administrators in Asia is a rapid diversification of strategies away from the traditional reliance on long/short equity variants. With alternative managers also launching private equity, real estate and hybrid vehicles, the more diverse product mix calls for a highly skilled pool of professionals capable of accommodating the varying characteristics of each investment strategy.

Fortis PFS continues to invest heavily in technology, personnel and infrastructure, to accommodate the growth of its clients and the requirements of the market for innovative financial products and services. The firm has devoted extensive resources to centralising its systems globally and to upgrading its business processes.

The so-called battle for the middle office is partly the result of the spiralling costs of developing complex IT systems. Suddenly outsourcing looks attractive to hedge fund managers, offering them access to the state of the art systems and robust infrastructure that the critical mass of big prime brokers and administrators can provide. Fund managers typically want middle office services to kick in immediately post trade execution, providing matching, clearing, and settlement, perhaps with some risk management tools and a variety of real-time reporting options.

Asia’s economic boom has intensified competition to attract and retain staff, and nowhere is this more evident than in the alternative investment sector. A major advantage enjoyed by Fortis PFS, with its centralised systems and global network of service operations, is the ability to shift some processes to other locations where there is greater capacity, easing the constraints of tight labour markets.

Gordon Shaw is a member of the global management team at Fortis Prime Fund Solutions, with specific responsibility for Asia and Europe

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