One of the fastest-growing areas of the Maitland group is its fund administration division, and in particular its alternative fund services business.
One of the fastest-growing areas of the Maitland group is its fund administration division, and in particular its alternative fund services business. Starting out with traditional mutual funds and funds of funds, Maitland moved into the alternative fund area a couple of years ago and is carving out an international reputation, with offices in the British Virgin Islands and Luxembourg helping to win new business from managers worldwide.
The alternative funds sector is a complex and specialised area of the industry that is not necessarily suited to traditional fund administrators that focus on volume and automated processes. Providing high-quality services to alternative fund managers requires a more tailored approach, but it offers attractive growth potential for the coming years as hedge funds become a more important area of investors’ portfolios.
At the same time, the increasing sophistication of hedge funds is making the administrator’s work more complex than it was a few years ago, requiring more intense co-operation between the client and the service provider. It’s no longer just a question of NAV calculation but increasingly a package of services ranging from valuation of exotic financial instruments to compliance issues.
Meanwhile, the use of third-party administrators is regarded as vital by investors in most parts of the world and the trend is also gaining ground in the US. For due diligence and risk reasons, an independent administrator is preferable to investors as a guarantor of the integrity of valuations and of the efficiency of the fund’s administration process. It also helps hedge fund managers to concentrate on their own areas of expertise – and it is a development welcomed by regulators everywhere because it relieves part of their own supervisory burden.
Maitland’s fund services business has relationship managers in centres in which clients are domiciled, but all the administration work is carried out at its centre of excellence in Cape Town, where the alternative funds division accounts for around 47 out of more than 250 staff and where employees can draw on the experience gleaned from working with a wide range of domestic and international clients. Fund managers and investors also benefit from Maitland’s wider offering of fund tax and structuring advice, as well as administration of the fund entity, be it a company or trust.
With its established financial services industry and well-educated population, Cape Town also offers a relative abundance of the skills required by the administration industry, and its time zone is convenient for liaison with Maitland’s front office operations and their clients in Europe. In addition, costs are generally lower than in many other fund jurisdictions, important for investors who demand high-quality fund servicing but do not want returns eroded by high operating expenses and management costs.
Cape Town’s attractions as an administration centre are luring other international service providers. However, Maitland has established a large market share through its specialist capacity in hedge fund administration and its ability to offer technological capability alongside individualised services to managers in areas such as reporting.
The hedge fund industry is growing dramatically in South Africa, with a regular flow of successful start-ups and a track record of fund managers that have developed over the years into major operations in terms of assets under management, with performance to match. The presence of an established administration sector is a key foundation stone for the industry’s future development.
Veit Schuhen is chief operating officer of Maitland’s fund services