State Street has launched a suite of hedge fund services in Asia-Pacific, which is being positioned as a significant growth driver for its Alternatives Investment Solutions division.
In addition to middle and back-office outsourcing services, State Street is also offering front-office tools for functions such as risk analytics and real-time profit and loss calculation.
Demand is being driven by State Street’s hedge fund clients in the US and Europe – where the services are already available – who are expanding to Asia, according to Bhagesh Malde, senior managing director of Alternative Investment Solutions in Boston.
“State Street is an investment servicing business [with] our alternatives business at the centre of the plate,” says Malde. The firm aims to capitalise on its position as the world’s second-largest hedge fund administrator – after leader Citco Fund Services – to grow its fund services mandates in Asia.
When compared with the more mature European and US markets, Asia represents only a small proportion of the Alternative Investment Solutions business, says Malde, “but it’s probably going to be the fastest-growing [region]”.
As part of the services push, State Street recently appointed former Walkers executive Carol Hall as head of alternative investment services in Asia-Pacific. Reporting to Malde, she is helping to develop the hedge fund servicing business in the region and also oversees the teams servicing private equity clients in Hong Kong and Singapore. Hall previously served as managing partner and head of investment funds at Walkers in Asia.
A bumper crop of new hedge fund launches in Asia – both by domestic and global firms – and an increase of investor allocations to the region have increased demand for outsourced services, says Malde. Another factor is greater variety of Asian hedge funds, which are diversifying away from the long/short equity strategy that dominates the region’s sector.
Says Hong Kong-based Hall: “We have seen a move by managers in the region to more complex strategies,” which State Street’s fund services platform is geared to handle.
Plans are in place to expand State Street's private equity and real estate fund administration services, as outsourcing grows in popularity among the wider alternatives sector.
“The private equity industry is where the hedge fund sector was between five and 10 years ago, with a large proportion of [administration] work still being done in-house,” says Malde. About one-third of the private equity industry is outsourced, with an even smaller rate of adoption among real estate funds.
However, alternatives investors are demanding more transparency, notes Hall. “It hasn’t typically been the case for private equity to outsource resources, but that is very much the trend we are seeing.”
Malde adds that State Street is making substantial investments in the area of real estate fund services “as we think [funds] will move to where it’s normal to have a third-party administrator verifying their assets”.