In Big HF Admins They Trust

Date: Thursday, February 14, 2008
Author: Hedge Fund Daily

Size matters in hedge funds, and in their choice of firms to administer them. According to Lipper HedgeWorld, as the industry continues to grow, the biggest hedge funds will continue to choose the largest HF administrators mainly because of their stability in time when the industry is consolidating. "When you wake up in the morning," Gary Enos, executive v.p. and head of alternatives investment servicing at State Street, told Lipper HedgeWorld, "we'll still be there.” And well they should: Last year, State Street saw another 33% boost in HF assets it administers to more than $290 billion. Just five years earlier, in 2002, it handled only $35 billion. Even its latest dollar amount pales compared with the biggest of them all, Citic Fund Services, with more than $500 billion in assets from 2,000 funds. Citic single-handedly administers 25% of the entire hedge fund industry. Lipper HedgeWorld says institutional investors favor the biggest HF administrators because they tend to have staff with specialized skills -- a valuable commodity these days when grappling with issues of pricing illiquid securities, such as collateralized debt obligations.  Having a top administrator is also a boon to hedge funds, says Lipper HedgeWorld, as IIs, such as pension funds, will invest only in HFs that have retained "recognized, well established administrator," one of the items on an institutional investor's due diligence check list.