In Conversation with Convergence, Episode 14: George Evans and Matt Lowe of Langham Hall Discuss Organic Growth, Returning to the Office, and the Fundraising Cycle

Who is Matt Lowe, and what does Langham Hall do?

Evans introduces Lowe as head of the U.S. for Langham Hall, which he calls a more than $100 billion fund administrator and a long-standing Convergence client. Lowe says Langham Hall is a global fund administration firm with 600 people across seven jurisdictions in Europe, Asia, and the U.S., and about $140 billion of assets under administration across more than 450 funds. He says the firm also provides services under the Alternative Investment Fund Managers Directive (AIFMD) for managers marketing a fund in Europe, with oversight of about $102 billion of depositary assets across approximately 120 funds.

Lowe says Langham Hall remains independent, owner-operated, and owner-managed, and plans to continue that way. He says the firm focuses on the illiquid space, working with private equity, real estate, debt, infrastructure, and venture capital funds, and does not touch anything in the liquid space. He says Langham Hall saw almost 22 fund-administration transactions in 2021, about 15 of them by European administrators.

How is Langham Hall approaching 2022?

Lowe says all of Langham Hall's business has been growing steadily, with existing clients launching new funds faster than in the past and new clients being won across all jurisdictions. He says the firm has always grown organically, does not buy businesses, and balances hiring and bringing on clients at the right pace. He says the labor market has been challenging but that Langham Hall has fared better than many and has hired high-quality people at a good pace.

For the rest of 2022, Lowe says the focus is existing clients, hiring at a pace that keeps up with them, and training people properly. He says there is no magic formula: the firm knows what it does and has to execute every day. Evans says the growth story shows in Convergence's numbers and analysis.

What is Langham Hall's view on returning to the office and hiring?

Lowe says Langham Hall tried to stay the same course across all of its offices during COVID, with some nuance by jurisdiction, and that it is sensitive to people's need for flexibility. He says learning slows down when people are physically detached, that the firm prefers to be in the office, and that it is in the office across all offices. He says a completely remote environment is not beneficial for the team or clients and that Langham Hall was one of the first firms back in the office, to varying degrees by jurisdiction.

Lowe says the firm explains why it wants people in the office, and that it is not only for face time: people train better and learn from each other faster. He distinguishes working at home all the time from flexibility, says the firm has emphasized flexibility since before COVID, and says people have not pushed back much. Evans says Convergence uses a hybrid model in which people are in the office on the same cycle for connectivity, with flexibility for personal demands, and says he believes the world is at the very beginning of a potentially very different way of working.

How are market volatility and fundraising affecting clients?

Evans says 2022 has been a rough year for the markets and that falling assets can pressure advisers when expenses stay flat, noting that outsourcing has been picking up from self-administration. Lowe says that so far this year volatility has not adversely affected Langham Hall's clients much, though he sees some trepidation about the future, and that clients are planning for volatility. He says some clients have had great realizations despite public-market volatility.

Lowe says the most interesting development is the fundraising environment. He says more clients are coming back to the market than ever before, and that the speed at which a client raises a fund, does a final close, and gets back in with another fund is faster than he has seen in his career. He does not think it is a short-term trend and says managers are assumed to be almost always fundraising. He says limited partners (LPs) are allocating much sooner, with some having allocated all of their capital as early as April and one starting to allocate for 2023 midway through 2022.

Lowe offers an explanation: an LP committing around June or July may feel it can encourage the general partner to use a line of credit for a few months, so capital is not called until December or January. He says there is no legal basis for that and that LPs will fund if capital is called. He says the number of funds in the market, from existing clients, existing managers, and new or emerging managers, has created more competition, and he cites a placement agent who said an LP that once looked at about five funds in a period is now looking at 15.

What are Langham Hall's plans for the rest of 2022?

Lowe says Langham Hall does not buy businesses and is not looking to be bought, so it is not focused on integrating businesses. He says the firm concentrates on hiring and training good people and on helping clients a bit more, with senior-level attention on clients because the firm is solely focused on the work it promised. Evans says Langham Hall's reputation in the market is high touch and excellent customer service, and that Convergence sees good retention numbers and sticky clients. Evans says Convergence has always enjoyed its relationship with Langham Hall.

How did the four service-provider markets grow from April 2021 to April 2022?

After the interview, Evans reviews league table growth for fund administrators, auditors, prime brokers, and custodians. He says 1,400 custodians service the SEC-registered market.

The figures below are as Evans states them, rounded or approximate. He measures assets for administrators, funds for prime brokers and custodians, and does not name a measure for auditors, citing the same 16% industry growth as administrators.

League table growth by tier, April 2021 to April 2022, as stated by George Evans

Evans says both the top five and the 11-25 group of administrators significantly outpaced the market while those ranked 6-10 trailed it, and that new business and funds won are driving the bulk of auditor growth toward ranks 5 through 25. On custody he says the top ten held their own, the middle group saw little growth, and business is moving down the rankings more, with a pretty significant amount moving in this period. These are 2022 figures; Convergence's current league tables are published in its monthly league tables post.

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