Absolute Return | Administration Q&A: Citco's Jay Peller
In the latest edition of Absolute Return, Jay Peller, Co-Head of Citco Fund Services answers a few questions about the administration industry.
Administration Q&A: Citco’s Jay Peller
‘When we look at the manager community, a lot of them are re-looking at their models and removing duplicate services and looking to outsource more. We are constantly working on models with our clients to help them scale their business while becoming more efficient’
In conjunction with the annual administration ranking, Hedge Fund Intelligence interviewed Jay Peller, co-head of Fund Administration Division at Citco.
Do you anticipate that two key trends - general consolidation and the departure of some banks from the administration business - will continue, and how are you positioned?
These trends have left us a bifurcated landscape with independent firms like Citco on one side and global banks on the other. I do think there will continue to be consolidation. Banks are selling their. Administration business because there are not as many cross selling opportunities as they thought. We’re not looking to sell or become a part of the merry go round, we like being independent and nimble. Unless there was a good reason, like someone had a great tech that’s better than ours, maybe, but we haven’t seen that. We like to build our own technology and keep our own clients happy. All the tech we use in our core servicing is proprietary. We feel that’s the only way to be flexible and nimble in terms of regulation and investors. You always need to make constant changes in your core system. So, build it yourself otherwise you’ll be waiting for a third party and it won’t be fast enough.
With all the reporting that comes out of the regulatory changes, which comes out of the maturing of the industry, I think that doing that reporting is quite sophisticated, and it results in relative disorganization and inefficiency. We don’t think it needs to be that complex, we’ve just released our 3rd generation portal which consolidates everything into one usable data source.
With hedge funds generally under fire for underperformance, are you receiving significant fee pressure from your clients?
On one side we see fees going down but on the other side we see opportunities to increase revenues by delivering other ancillary services. A lot of the pressure is coming from firms seeking to build market share in our industry. There is clearly a race to the bottom by some of these firms that have rapidly added assets, by acquisition, over the past couple of years. This will inevitably have a consequential impact on their margins and can only mean that there is less to devote to service delivery not to mention future enhancement in their technology offerings.
When we look at the manager community, a lot of them are re-looking at their models and removing duplicate services and looking to outsource more. We are constantly working on models with our clients to help them scale their business while becoming more efficient.
What does the much-discussed trend of large firms moving toward quantitatively driven strategies mean for your business? Are you seeing this trend play out or is it premature and mostly talk at this point? How are you responding?
For us it doesn’t change how we do our business, but the biggest thing is the huge volume of trades. You can’t do this manually, you have to have top notch infrastructure and systems to handle the volume. Are you automated enough? Otherwise don’t bother trying to do it.