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Industry Spotlight > Broker Dealers

LaCrosse Global to Buy BofA-Merrill Fund-Admin Business

By John Sullivan

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LaCrosse Global Fund Services announced it has agreed to acquire the global alternative fund administration business of Bank of America-Merrill Lynch, subject to regulatory approval.

Terms of the deal were not disclosed.

Once the acquisition is complete, LaCrosse will have $21 billion in assets under administration (AUM) and more than 250 employees.

LaCrosse is a provider of operations, middle-office and administration services to managers of hedge funds. The company operates in nine locations, including Bogot?, Buenos Aires, Istanbul, London and Minneapolis.

According to LaCrosse co-CEO Chris Kundro, the acquisition is part of a larger trend in the hedge fund administration industry in the post-Madoff era.

“Since [the scandal] happened, we’ve seen a clear increase in demand for independent, third-party fund administration, not only here, but globally as well,” Kundro said in an interview. “Self-administration is now a dirty word.”

And investors want to know, specifically, what third party administrators are doing. While investor due diligence was always part of the process, Kundro says operational due diligence (ensuring quality auditing services, technology and that the money invested is actually real) are increasing in popularity.

Kundro says maybe a dozen investors were interested in operational due diligence prior to Madoff, but he expects 100 investors to visit his offices this year.

He adds there is also increasing sensitivity around costs and fees.

“It’s not that the standard 2-and-20 is done,” Kundro said, referring to the 2% management fee and 20% of the profits hedge fund managers usually charge. “It’s that there might be more give and take, meaning they might reduce those fees in exchange for a longer lock-up period.”

The transaction is subject to regulatory approval in various jurisdictions and other customary closing conditions.

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