Deutsche Bank has launched hedge fund administration services in Hong Kong, aiming to leverage its strong prime brokerage business to build market share in an increasingly crowded sector.
The Alternative Fund Services (AFS) business offers administrative and banking services to hedge funds, funds of hedge funds, private equity and real estate funds.
It is led by Martin O’Regan, the bank's regional head of AFS for Asia, who this month relocated to Hong Kong from Singapore, where he had been based since the launch of AFS in the Lion City in 2008. He previously worked for the fund services division of UBS in Hong Kong and Apex Fund Services in Dubai.
AFS’s operations in Singapore and Hong Kong will serve the pan-Asia region, including China. “Right now we have clients in Vietnam, Thailand, Australia, Hong Kong, Singapore and Taiwan,” notes O’Regan. “We’ve got several [China] private equity managers signed up.”
Deutsche has a goal of being one the top five hedge fund administrators in Asia, says Mike Hughes, the London-based head of AFS for Asia, Europe, the Middle East and Americas. “We wouldn’t be entering this market if we didn’t think we could be a major player within a three- to five-year time-frame.”
It is an ambitious goal, given the number of existing hedge fund administrators in the region – estimated at between 25 and 30 by industry executives – and the eagerness of banks and custodians to gain a share of hedge funds services in the sector.
Deutsche is a relative latecomer, having entered the sector in 2008 through the acquisition of US-based hedge fund administrator HedgeWorks. The bank had previously offered a limited range of offshore admin services in popular low-tax hedge fund domiciles such as the Cayman Islands, Ireland, Luxembourg and the Channel Islands.
At the time of the acquisition, HedgeWorks had $10 billion in assets under management, which has grown to $80 billion in the past three years, says Hughes.
The bank’s strategy has been to grow its asset services mandates on the back of its prime brokerage business – an approach that has been successful for Goldman Sachs. According to a recent AsiaHedge survey, Deutsche’s prime brokerage is the fourth-largest in Asia by number of mandates and hedge fund assets under management.
AFS will leverage Deutsche’s name recognition in other areas, such as its corporate banking services in China, which O’Regan notes is becoming a lucrative hedge fund market. “Everyone wants to start a billion-dollar fund out there.”