Section 2 - FTSE

Marina Lewin, managing director, alternative investment services for
The Bank of New York Mellon.“It is true that there has been real
retrenchment within the fund business, and yet from our point of
view, the industry will still move forward, particularly as toxic debt is
absorbed,” she says. Lewin sees hedge funds continuing to operate with
a lean infrastructure, affording considerable back- and middle-office
outsourcing opportunities for administrators.“More and more, these
funds are asking their service providers to get involved in performance
calculation, trade processing and trade flow, liquidity and so forth.
That’s where we’ve seen the greatest emphasis,” she adds. Photograph
kindly supplied by The Bank of New York Mellon, December 2008.
Mellon. “It is true that there has been real retrenchment
within the fund business, and yet from our point of view,
the industry will still move forward, particularly as toxic
debt is absorbed.” Lewin sees hedge funds continuing to
operate with a lean infrastructure, affording considerable
back- and middle-office outsourcing opportunities for
administrators. “More and more, these funds are asking
their service providers to get involved in performance
calculation, trade processing and trade flow, liquidity and
so forth. That’s where we’ve seen the greatest emphasis.”
While putting added pressure on fees, the market
contraction has at the same time hastened the flight to
quality, says Lewin. Diversified administrators who can
also provide custodial support are much better suited to
weathering seismic shifts within the market.“Many of our
current customers have legitimate concerns about
counterparty risk, and are looking for a safe haven. As a
financial institution that can offer custodial, short-term
money management as well as corporate-trust services, in
addition to administration services, we feel we are in a very
good position, particularly as the industry finishes its
retrenchment and begins to gradually recover.”
Peter Cherecwich, head of global product and strategy for
Northern Trust’s asset servicing business, agrees that
F T S E G L O B A L M A R K E T S • J A N U A R Y / F E B R U A R Y 2 0 0 9
administrators with custodial ties have a competitive advantage
in this type of environment.“Custodians have the flexibility to
shift clients in and out of strategies with much greater ease, he
says,adding:“If your entire infrastructure is only geared towards
alternative classes, you may not be able to adapt as quickly.”
Though the momentum has slowed for the time being,
Cherecwich believes that alternative classes will not be
down for long.“We’ve seen anywhere from 30% to 50%
growth in the derivatives market over the past few years,
and that has obviously flattened out. In the meantime,
there has been this great push towards risk management
and, along with that, better administrative tools to help
measure that risk. Which, in turn, compels us to go to
provide our clients with the kind of tools and information
that can help them better understand what they’re
getting into.”
The overriding factor, says Lewin, is the constant need
for reporting independence, and those who haven’t yet
outsourced will likely get on board over the near term.“In
order to keep their institutional investors satisfied,
managers are looking to go to the highest-quality type of
financial institution for their administrative needs—
whether it is an accounting division looking for
independent price verification, or providing institutional
investors the security of knowing that their portfolio is
being carefully monitored. All of these things will work as
a benefit to the stronger administrators.”
Tech Still Tops
A report issued by Celent calls for a decrease in technology
spending among investment managers throughout 2009.
As a result, managers will likely continue to outsource IT in
an effort to keep pace while lowering costs, says Alan
Greene, executive vice president and head of US
Investment Servicing for State Street Corporation. “The
weakening economy will lead managers to trim this
portion of their budgets at a time when implementing new
functions could be more necessary than ever. This
highlights the benefit in shifting the expense obligation
and responsibility for technological enhancements to a
third-party provider.”
It is difficult to envisage any administrator maintaining a
competitive offering in the fund services industry without
investing in the kind of software that can meet the increased
demand for transparency, argues Richard Harland, business
development manager for Mourant International Finance
Administration. “Mourant continues to invest in market
leading software solutions across our global office network
and our systems enable bespoke solutions to client needs
and serve as powerful reporting tools,”he says.
Servicing alternative fund structures, the impetus
behind last year’s acquisition of Bisys, remains a core
competency for Citi, says Andrew Smith, head of the
bank’s North America funds and securities services.
Robust investments in technology that allow alternative
managers to access data in real-time and meet clients’
need for transparency and performance evaluation
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