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Hedge fund managers couldn't stay committed in 2013

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North American and European managers have been more active in switching service providers in 2013, with 35 percent on both sides of the pond changing service providers during the past year, a new report from Preqin reveals.

The trend was more pronounced in certain regions. The report indicates that 55 percent of Asia and rest of world managers have switched a service provider in the past five years (excluding the last 12 months).

Fund administrators and prime brokers were the most commonly switched service providers in the past year and over the longer time frame. Three-quarters of all Asia and rest of world fund managers have switched fund administrators over the past five years, compared to 56 percent of Europe-based and 52 percent and North America-based managers.

Among the report’s additional findings:

  • 61 percent of Europe-based and 48 percent and North America-based fund managers have changed prime broker compared to just 25 percent of Asia-Pacific-based managers;
  • Dissatisfaction with the quality of service led to 62 percent, 53 percent and 86 percent of North America-, Europe- and Asia and Rest of World-based fund managers, respectively, to change service provider;
  • SS&C GlobeOp was selected by the largest number of funds which launched in 2013 for administration services, following its consolidation and acquisitions in 2012; and
  • Morgan Stanley jointly tops the most commonly used prime broker by funds launched in 2013 with Goldman Sachs, each representing 19 percent of funds launched in 2013.

“Our recent study of fund managers shows that many hedge funds change their service providers,” says Amy Bensted, head of hedge fund products at Preqin. “Forty-five percent of the respondents indicated they had switched service provider at least once since their fund’s inception.

“Dissatisfaction with the quality of the service they receive is a common concern across all fund managers, and is a particular problem in emerging regions for hedge fund management, as the service provider sector may be less developed or has little local presence,” she adds. “There is certainly an opportunity for groups that can provide consistent, good service on a local level to appeal to this growing group of managers in Asia-Pacific and other regions outside North America and Europe.”


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