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Allison Smaluk, LaSalle Global Fund Services: Administrators lack systems to cope with structured products |
"We saw a lot of independent administration firms taking on hedge funds regardless of whether they could cope with their strategy," says Allison Smaluk. US head at LaSalle Global Fund Services. "Long/short equity was typically the strategy administrators were and are used to serving, and when increasingly managers would start to use structured products, administrators did not have the systems that could cope."
LaSalle has entered the administration business from the opposite side to most administrators. The firm dominates the structured product trustee market. At the end of the first half of 2007, the firm was number one in the CDO market, number one in CMBS and fourth in RMBS (as ranked by Asset-Backed Alert). "It made sense for us to enter the market from this angle. We were trustee to structured products users, then last summer we started offering financial reporting for managers, and a natural follow-on was to take that knowledge and launch a full-service hedge fund administration service," says Smaluk. In addition to being able to service managers in fixed income, LaSalle is taking on hedge fund clients with equity strategies. "We certainly don’t want to be considered as niche. We started with the hardest products first and that makes it easier for us to handle other strategies. About half of the hedge fund money under management out there deals with complex strategies that we already service," says Chris Bogner, head of business development analytics at LaSalle Global Fund Services. Smaluk says she is unconcerned about the vast amount of competition in hedge fund administration. "The last I heard was that there about 170 administrators out there, and I do think there will be consolidation," she says. "I don’t think we’ve yet to see a lot of fallout on the administration side, and it is a hard task to change administrators. But it is rare to hear a manager praise their administrator. There are clearly issues in the market, and we are confident there is room for an administrator that is getting it right and servicing hedge funds correctly."
Big backer
Bogner says LaSalle will benefit from the backing of its parent. "Having ABN Amro – the resources of a big bank – behind us means we have the money to invest in technology to cope with new strategies," he says. "We’ve also taken on staff from hedge funds themselves and from other administrators who know the failings of the administrative industry."
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