Original article seen here by Sam Macdonald
HFMWeek data has revealed the scale of the asset leakage from Citi’s hedge fund admin before it was sold to SS&C.
The latest HFM AuA survey, covering the six-month period between October and April, shows that only $135bn of single-manager assets have been added to SS&C’s book of business since the Citi transaction closed earlier this year.
Citi put the admin business up for sale at the start of 2015 and the last available AuA figures, from October 2014, suggested it had $326bn of single-manager assets.
SS&C has told HFMWeek that $100bn of hedge fund AuA was in fact retained by Citi, something not publicised as part of the deal.
HFMWeek understands that Citi has retained a number of marquee hedge fund admin clients due to them having multiple ongoing servicing relationships with the bank. Citi has refused to confirm the figure or comment on the matter.
Despite the retained assets there is still a gap of nearly $100bn between the single manager hedge fund AUA reported in October 2014 and the increase in SS&C’s assets since the deal closed.
FoHF assets appear to have been much more sticky, with $40bn of assets added to SS&C over the six-month period. Citi recorded FoHF assets of $56bn in October 2014.
SS&C announced in August last year that it had struck a $425m deal to buy Citi’s hedge fund and private equity administration units, although when the acquisition completed seven months later the price had fallen to $321m.
Citi’s decision to publicly state that its hedge fund business was up for sale in January 2015 led to a rush of competitors attempting to profit from the disruption by poaching business.
SS&C suggests that the majority of the leakage occurred before its deal to acquire the admin book was announced last summer.
“We believe since the announcement of our acquisition [on 18 August] that there has been very little attrition in either the hedge fund or private equity fund administration business,” said an SS&C spokesman.
“Citi retained several large asset managers and they were not included in the scope of the transaction.
“In addition, a handful of clients decided to move to other administrators prior to SS&C closing on the transaction.”
One high-profile departure from Citi’s admin came when Man Group decided to move a significant part of its $17bn AHL admin business to BNY Mellon, as revealed by HFMWeek this March.
It is understood Man wanted to use a bank-owned admin.
Consultancy firm Convergence says that in most cases, hedge funds themselves initiated a move rather than being removed by Citi.
“While we cannot determine whether the changes were initiated by the buyer or adviser, Convergence data suggests that perhaps as much as $105bn of the changes were prompted by the administrator. Convergence bases its observation on the size of the funds that were switched,” says Convergence co-president John Phinney.
According to the AuA Survey, total hedge fund assets fell around -6% to $4.7trn over six months, down from $5.0trn at the end of October.”