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Alternative Assets Under Administration Rose Nearly 17% in 2014

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The alternative fund administration industry’s global assets under administration continued to grow at a double-digit rate in 2014.

Administrators in a new survey by eVestment reported assets of $6.9 trillion at year-end, a 16.8% increase from the end of 2013.

For the report, eVestment polled administration firms that serve hedge funds, funds of hedge funds, private equity funds, real estate funds and liquid alternatives funds.

In a statement, eVestment’s head of research, Peter Laurelli, pointed to several findings that emerged from analysis of the results.

Total private equity and real estate fund assets under administration in 2014 took a sizable leap, up 23.7% year over year for a total of $1.6 trillion. This compared with hedge fund assets under administration growth of 15.5% to $4.2 trillion and fund-of-hedge-funds asset growth of 11.9% to $902 billion.

Laurelli said the private equity and real estate figure likely represented less than half of the overall growth on a dollar basis as survey participants estimated that 60% to 70% of those fund assets were still administered in-house.

At the same time, respondents expected that regulatory burdens and investor demands would likely drive increased outside administration at these funds.

In contrast, adoption of outside fund administration is almost universal among hedge funds, funds of hedge funds and liquid alternative funds, according to eVestment.

The survey found that institutional investors and globalization were driving much of the increased asset growth for alternative fund administrators.

Institutional investors insist on transparency, while investment managers look for expertise in local and global regulatory and compliance issues as their investment strategies become more global.

Almost all participating administrators expected the number of firms to decline as merger-and-acquisition activity continues to consolidate the administration industry.

They offered varying opinions on the drivers for additional M&A activity, but most agreed on the need for a global footprint and the ability to absorb the ongoing and rising costs of providing regulatory reporting services.

According to the survey, the major trends for the fund administration sector were price competition, cost pressure from more robust offerings and clients’ desire for on-the-ground knowledge.

Respondents also noted potential for further industry segmentation between firms servicing the needs of very large managers and those catering to emerging investment managers.

As a group, administrators in the survey were most optimistic on their growth prospects in North America and Europe.

Their expectations for North America, Europe and Africa increased relative to Asia/Pacific, Latin America and the Middle East compared with results in last year’s survey.


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