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Building a strong capability for US clients


Endowments and institutions in the US have become the dominant investors in the hedge fund industry, drawn by the potential of generating returns that are uncorrelated with traditional equity and b

Endowments and institutions in the US have become the dominant investors in the hedge fund industry, drawn by the potential of generating returns that are uncorrelated with traditional equity and bond markets. With the increase in their hedge fund allocations, they are in a position to demand that managers seek higher levels of fund administration service as an additional assurance to investors.

Third-party fund administrators are increasingly becoming managers’ chosen source for independent net asset values, which can be cross-checked against the numbers tallied internally by the managers. They expect fund administrators to produce NAVs in an error-free and timely manner, and looking forward, they expect administrators to provide detailed information on how performance is calculated.

At the same time, the complexity of investment strategies being pursued by managers is increasing. The clients of Fortis Prime Fund Solutions are not only trading complicated instruments but are diversifying into private equity and real estate investments. The boundaries that previously separated alternative investments into various asset classes are rapidly becoming blurred. That is giving rise to accounting, legal and tax complications, which makes for an even more challenging task for the fund administrator.

Fortis Prime Fund Solutions has adapted quickly to keep pace with these changes, adding specialists to handle administration tasks associated with complex derivatives and other esoteric strategies along with associated accounting and tax matters. The firm’s specialised desks are equipped with complete expertise in these complex areas while many competitors still cater mainly to long/short equity, which are the easiest funds to handle.

Fortis Prime Fund Solutions established a presence in the US two years ago. The firm has serviced offshore funds for US managers for a long time, but took the decision to create the business in order to be geographically closer to its clients. The 15-strong sales and client relationship management team services a wide range of clients, most of them located in the hedge fund hothouses of New York and Connecticut.

Considering the dominance of US managers in the global hedge fund market, Fortis has decided to expand its business offerings in the country further, establishing an operational hub in the US that will offer local fund accounting, share registry and banking services to national clients. This is important because Fortis wants its touch and feel to be like a US company, so that local clients are more comfortable in their dealings with the company.

Unlike other banking houses that have acquired fund administration operations, such as Citigroup’s acquisition of Bisys in 2007 and Deutsche Bank’s purchase of HedgeWorks in February this year, Fortis’s strategy is to expand its offerings organically. The Prime Fund Solutions business is not short of skills or technology, capable of relying on its strong global systems and knowledge to propel the US expansion. The firm is adapting its systems to US standards and plans to take this initiative live over the next few months.

The latest offering will round out what’s already a robust service, including fund administration, tax support, custody, and bridge and leverage financing. Fortis has built outstanding expertise in servicing blue-chip funds of hedge funds, which comprise more than half of its total US business, while in single-manager funds its strength lies in the ability to handle clients that are active in more complex and high-volume trading strategies, such as multistrategy products.

Jacques Bofferding is regional managing director, Western Hemisphere, at Fortis Prime Fund Solutions

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