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Portfolio > Alternative Investments > Hedge Funds

Custom House: First Hedge Fund Administrators Rate

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LONDON (–Moody’s Investor Services has assigned a Baa1 management quality rating to Custom House Administration & Corporate Services, Ltd., Dublin, the first rating it has given to any hedge fund administrator.

Moody’s launched its MQ ratings three years ago, according to analyst Vania Schleef, until now using them only to evaluate service providers of traditional funds. It began looking at administrators of hedge funds only a year ago, and this is the first fruit born of that decision.

“We look at the service providers, because it’s important everything works around the funds,” she added.

In Moody’s more familiar investment-grading system, Baa represents a medium grade (neither highly protected nor poorly secured).

Ms. Schleef said the MQ grades are “comparable” to the investment grades. Her report said that, on the plus side, Custom House’s top management demonstrates “a comprehensive understanding of the hedge fund management business, backed up by their extensive experience, providing the company with an excellent insight into key industry trends and developments.” On the negative side, it continued, efforts to rationalize its organizational structure and apply new procedures “have only been relatively recently undertaken [and] Custom House still needs to ensure full implementation across the different areas of the business.”

The chairman of Custom House, Dermot Butler, expressed his satisfaction with this rating in a statement.

“Custom House has demonstrated that the considerable amount of work put in by its staff and management over the past two years to implement the new PFS-PAXUS system and the reorganization of the company–including strengthening procedures, controls and middle management–has paid off,” he said.

Custom House is authorized by Ireland’s central bank under the Intermediaries Act or 1995 to provide administrative services to collective investment schemes. It concentrates on alternative investments and hedge funds. It now administers approximately 180 funds for more than 90 investment management clients with total assets under administration approaching US$3 billion, and with a staff of more than 80 people.

Ms. Schleef’s report observed, “Since the company is not part of a banking group, it is not in a position to offer comprehensive service that goes beyond fund administration activities.”

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