In Conversation with Convergence, Episode 44: George Evans and Steven Millner of Gen II Fund Services Discuss Acquisitions and Digital Servicing

Who is Steven Millner, and what is his background?

George Evans welcomes listeners to the 44th episode of In Conversation with Convergence, a monthly podcast featuring clients and special guests. He introduces Steven Millner, CEO and co-founder of Gen II Fund Services, a recognized expert in fund administration, and welcomes him back from an earlier appearance on the podcast. At the end of the episode Evans thanks Gen II for being a great client of Convergence for an awfully long time.

Millner says he is a CPA by background and has been involved in private markets for over 25 years. He says he launched the first institutional-grade private equity fund administrator in the early 1990s, which grew substantially and is still one of the largest PE fund administrators in the world. He says that business developed a technology company he helped found, Investment Cafe, a limited partner reporting system that became part of eFront and is now part of BlackRock. He says he and some colleagues formed Gen II in 2009, so the firm is celebrating its 15th anniversary, bringing teams in from around the world.

What does Gen II focus on?

Evans says there are about 650 fund administrators in the world and that market share follows an 80/20 rule, probably a 90/10 rule. Millner says Gen II focuses exclusively on private markets: buyout, credit, real estate, infrastructure, and funds of funds. He says it targets mid-market to upper mid-market managers, typically with fund sizes of $500 million and up, with large funds meaning $20 billion and up.

Millner says Gen II is considered a large administrator and, as he puts it, is number one on Convergence's data, which Evans confirms. He says Gen II takes care of over a trillion dollars of assets globally, with over 1,700 employees in 14 offices.

How have investors and acquisitions shaped Gen II?

Evans asks about the recent investor transactions. Millner says Gen II was an owner-operator for a long time and realized the opportunity in front of it surpassed all wallet sizes, so at the end of 2020 General Atlantic and Hg both invested, which he calls a catalyzing event. He says the capital enabled strategic acquisitions on top of strong organic growth, and that Gen II was probably one of the first to bring third-party capital into fund administration, a trend he says is now common.

Evans says Convergence can look in detail at any administrator's growth and decompose it, and does work for private equity firms, large consultants, and portfolio management groups at investors in publicly traded administrators, because growth through acquisition tells a very different story from organic growth through sales and new logos.

Millner describes the acquisitions in order. In 2021, a regional West Coast administrator with a retiring founder, similar DNA from a CPA firm background, and about 120 people in Denver, which he says has grown to probably 180. A couple of years later, which he places in 2022 or 2023, a small LP portal provider in Vancouver, whose portal Gen II re-engineered. A data and analytics tool built earlier in 2024. A very large electronic subscription-document platform that he believes is the largest in the United States, closed in June. And Gen II's largest acquisition, Crestbridge in Europe, which added about 500 people, a good mid-market client base, and jurisdictional capability in Ireland, London, and the Channel Islands beyond its existing Luxembourg office.

How is Gen II building its team?

Evans notes that the team keeps getting stronger and asks about hiring. Millner says that when Gen II brought in institutional capital, the first priority was a more robust executive team, adding a chief people officer, a chief commercial officer, a new chief financial officer, and a chief administrative officer, followed by a second layer of management. He says Gen II has also added a new head of investor services, a new person in regulatory and compliance, and a new controller who started that day, and that the investments in people were made early and are starting to pay off.

Millner says Gen II hires between 100 and 150 recent graduates every year and, because nobody learns private equity in college, has created a school within Gen II, with classroom-style training spaces in Colorado, New York, and Europe and a curriculum that trains fund accountants to grow into managing directors over time. Evans says the university concept sounds big but is necessary.

What is Gen II 2.0, and how does Millner view adjacent services?

Millner says clients want a range of services from a fund administrator, because smaller firms are long on dealmakers and capital raisers and short operationally. He describes Gen II 1.0 as classic fund administration and Gen II 2.0 as fund administration plus capabilities such as an LP portal, a data and analytics tool, and electronic subscription documents, all with one vendor. He says that with digital data, Gen II can take an investor from subscription document through automated AML/KYC onboarding to the portal and a capital call in less than a week, where it used to take a month, and has done it in three days.

Evans asks about administrators adding bolt-on services such as cyber, managed IT, fractional CFO and CCO services, and compliance. Millner says Gen II is seeing the same thing, but its core competency is fund administration, so technology products around fund administration resonate, while managed IT is outside its skill set and better handled by other experts. He says most of Gen II's moves come from client demand, such as clients frustrated by PDF subscription documents, and that clients' funds keep getting bigger and more complex, so Gen II needs a full catalog of services to stay shoulder to shoulder with them. Evans predicts compliance will continue to be absorbed by fund administrators, given the number of small shops, and sees a vast opportunity.

What stood out in 2024 for Gen II?

Evans, recording on December 2, asks for Gen II's biggest accomplishments of 2024 and the headwinds and tailwinds. Millner says fundraising has been tough for mid-market and upper mid-market managers and even large ones, with longer fundraising durations. He says the emerging manager market shut down abruptly from early 2023 into 2024, which matters because Gen II has an emerging manager platform he thinks is probably the largest in the country, but that it picked up in the second half, and that Gen II had just won a $1.5 billion emerging manager that day.

Millner calls the two big transactions of 2024 transformational: the European acquisition of Crestbridge, which closed in April after more than a year and nine months of regulatory approval, and the electronic subscription platform, which closed in June. He says Gen II also refinanced its debt in the syndicated loan market in the week before the recording. After getting rated and meeting about 150 institutional investors, he says Gen II received interest about three times what it was selling and lowered its interest rate. He says investors like the private equity administration space for its revenue retention and its SaaS-like model, and are betting big on private markets and mission-critical providers. Evans says that links to democratization, with private markets eventually reaching 401(k) plans.

What are Gen II's priorities for 2025?

Millner says Gen II is financially strong and will reinvest. First is people: it is still a service business, and recruiting and retaining good people is job one. Second is integrating the two large transactions so clients get the best experience, and evaluating a couple of firms that the rumor mill says may come to market where they add strategic value. Third is retail: Gen II got on the retail journey fairly early, partnered with some of the larger retail players, and says retail is a good size of its book. He says it may come through feeder funds or conduits, non-traded 40 Act funds, and even traded 40 Act funds, and that Gen II is looking at where its role fits. Fourth is private credit, which he says is growing like a weed, with investments made this year in people and technology that will continue.

Asked about Asia-Pacific, Millner says Gen II has one eye open, with Singapore the most interesting protocol right now, but has not had much demand pull from clients, and Asia is early to private markets compared with the United States and Europe. He says that as a global player it is likely Gen II will eventually put a flag up. Evans says he also looks at Singapore and Abu Dhabi.

Which figures did Evans and Millner cite?

Figures stated in Episode 44, December 2024

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