Funds are maturing – and not just in the financial sense of the word. Due to mounting regulatory pressure and increasingly complex investment strategies, more and more funds are outsourcing a part of their administration operations in order to focus on generating returns. This trend is also driven by the market pressure on firms to deliver operational excellence, better reporting and tighter accounting processes with greater transparency.
As their key business partners, fund service providers are also under transformation. Globalization, regulatory change, cost containment, implementing new technology, preventing and fighting cyberattacks, maintaining service quality and pressure on fees are just some of the key challenges the fund servicing industry faces today. Historically, the fund servicing market lacks homogeneity and service levels vary. Many fund service providers are backed by banks (e.g., BNY Mellon, BNP Paribas Securities Services and CACEIS) or prime brokers (e.g., Goldman Sachs Administrative Services and JPMorgan Hedge Fund Services), but independent players are gradually gaining their place by focusing on providing cost-efficient solutions and quality customer service.
Depending on what the client needs, service providers are trying to differentiate themselves by either providing a full-spectrum of comprehensive services or adopting a “best-in-breed” approach. The increasing maturity of the market is also leading to a concentration of players. For example, SGG, a Luxembourg-based leading global provider of financial services, conducted active acquisitions in France, Mauritius and Luxembourg between October 2016 and July 2017.