Paddock Consultancy Served as Financial Advisors to Mainspring in Sale to Apex Group

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Apex Group press release:

Apex Group Ltd. (“Apex Group” or the “Group”), a global financial services provider, announces today the acquisition of Mainspring, a UK-based provider of venture capital fund administration and accounting services.

Mainspring provides outsourced administration and accounting services to small and medium-sized venture fund managers in the UK. Mainspring also operates an FCA-regulated custody business for fund managers offering managed account investments such as EIS funds.

The addition of Mainspring adds 70 employees in two UK offices, and assets under administration (“AuA”) of £9.7bn to Apex Group. This is comprised of £3.7bn on Mainspring’s Investment Platform which provides private markets funds and deal custody, and £6.0bn of venture capital fund administration.

Mainspring brings notable new capabilities to Apex Group for international private markets custody and SMA administration as well as a depth of experience in venture capital fund administration that complements the Group’s existing offering.

Through this acquisition, Mainspring’s clients will benefit from Apex Group’s global perspective, access to a network of local experts and a wide range of services including Digital Banking and ESG Ratings & Advisory. Apex Group’s services are provided through a single relationship, offering efficient, scalable solutions and enabling growth and expansion into new jurisdictions.

This announcement follows the recent close of the acquisition of Sanne, with Apex Group now providing services to almost $3 trillion of assets, delivered via 10,000 employees from over 80 offices in more than 40 markets.

Peter Hughes, Founder and CEO of Apex Group, comments: “The strategic acquisition of Mainspring adds depth to our service offering for UK venture capital funds, as well as strengthening our existing custody offering for private assets. As private equity and venture capital continue to become more accessible to a wider pool of investors, including wealth management clients, we are continuously evolving our single-source solution to offer the administration, custody and reporting services in order to be the best possible partner for our clients.”

Stephen Geddes, Founder and CEO of Mainspring, adds: “We are excited to be joining Apex Group and are confident it will enable us to provide our clients with the services needed to expand into new jurisdictions and achieve their full potential. Apex Group’s powerful single-source solution, offered globally and delivered locally by experienced teams, is underpinned by robust technology infrastructure, which will create new efficiencies for our clients and support their long-term growth.”

Paddock Consultancy served as financial advisors to Mainspring, with Burges Salmon providing legal advice. Simmons and Simmons acted as legal advisors to Apex Group on the transaction.

The transaction is subject to customary conditions, including regulatory approvals expected in late 2022.

Paddock Consultancy in the News

Bill Salus Talks Fund Services M&A with Alternatives Watch

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Bill Salus recently sat down with Susan Barretto, editor of Alternatives Watch, to discuss the temperature of M&A activity in the fund administration space. As a firm specializing in the asset servicing space, Paddock Consultancy sees firsthand the growth and product development challenges fund administrators face. These challenges are leading to increased M&A activity in the industry as fund services companies look to augment their core accounting services with other products like data analytics.

You see this movement in that fund administration is taking a much broader view of the wallet of these managers. Just because of the potential to expand the outsourcing mandate, there is a lot of room for M&A.

Read the insightful article here.

A New and Developing Model of Outsourced Fund Administration Services is Gaining Traction

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Bill Salus, CEO and Founder of Paddock Consultancy, James Wheatley, president for the Americas at Mainstream Fund Services, Spencer Hoffman, partner at Lovell Minnick Partners, Treabhor MacEochaidh, head of debt services at MUFG Investor Services, and Ryan Burns, head of global fund services for the Americas at Northern Trust speak with Tom Stabile from FundFire about their thoughts on a new, hybrid approach to outsourcing fund administration, called co-sourcing.  Though still in its early stages, this “shared sourcing” model blends together the benefits of an independent fund administrator with those of managers keeping operations technology in-house. 

Click Here to Read the Article

The Fund Administration Business Model is Changing, Driving Firms to Rethink How They Distinguish Themselves

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Bill Salus, CEO and Founder of Paddock Consultancy, speaks with Terrance J. O’Malley in TJO Management’s most recent Operational Leaders podcast.  Drawing on three decades working with asset, fund, and investment firms, Bill shares his deeply experienced perspective on the current state of the fund administration business, how he sees the business transforming, how firms are redefining and distinguishing themselves, and what M&A activity in the administration space could mean for managers in the future.

Click Here to Listen:

The Beat Goes On….Continuing The Trend of Fund Administration M&A Activity

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Alan Meaney, CEO of Fund Recs, and Bill Salus, CEO and Founder of Paddock Consultancy, discuss historical trends in Fund Administration M&A, as well as thoughts on the impact of today’s environment on the future. 

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Silicon Valley Comes to Investment Operations

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Outsourcing fund administration is a big decision, and one that many fund managers have historically been reluctant to make. However, over the past few years, investor needs have driven increased administrative demand on funds of all sizes, and many GPs have begun to realize that in-house fund administration is often a misuse of precious resources.

The question remains: If you’re going to move to third-party fund administration, how do you do so securely and cost effectively? It should, in theory, be possible to outsource fund administration in a way that frees bandwidth, boosts investor satisfaction, and actually lowers your operating expenses… but the steps needed to get there aren’t always obvious.

In this free webinar recording, NES Financial hosted a panel of experts discussing crucial considerations in outsourcing private equity fund administration, and best practices to follow when choosing the nature, and extent, of the administrator’s role.

Here’s what we discuss in the recording:

  • Why outsource at all?
  • How to vet independent administration options (e.g., are they using the same off-the-shelf tech as everyone else?)
  • How to leverage third-party administration to attract and keep investors
  • The benefits of scale: why flexibility may be the most important attribute in a fund administrator
  • The client’s perspective: a case study in adopting third-party administration

Who should watch?

  • Fund managers and GPs
  • Investors
  • Registered investment advisors
  • Accountants
  • Fund lawyers

Take advantage of our experts’ insights. Fill out the form to the right to watch the recording now.

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Managers Pressure Hedge Admin Shops for Juiced-Up Tech

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Growing investor demands to make the most of all their data is speeding ahead, putting pressure on administrators and causing some hedge funds to re-evaluate their admin relationships.

That pressure for upgraded technology is mounting after the busiest year on record in merger and acquisition activity in the fund administration space.

Hedge fund managers are looking for middle office, trading, and onboarding support as well as fund reconciliation, asset level transparency, data operations work, and the ability to offer limited partners deeper insight into their holdings, says Bill Salus, CEO of Paddock Consultancy, which focuses on the fund administration market.

“I think the new landscape is not fund administration as a lead core product but as part of a larger technology stack that addresses the broader needs of the manager,” he says.

The focus on data has only grown with the expectation that top tier admins should have a data offering and dashboards that give immediate access to status on fund net asset value (NAVs), reconciliation, and daily profit and loss (P&L), says Peter Sanchez, CEO of Northern Trust Hedge Fund Services.

“The big theme is the rush to have a data service and an expectation that you won’t take on a client without the ability to share the data and give informed context around it,” he says.

As the marketplace grows more competitive, many large hedge funds are also reviewing the long-term, existing relationships they have with administrators. “It’s the result of trying to squeeze out as many services as possible,” Sanchez says, as well as fee compression on the manager side and hedge fund clients looking for an enhanced experience.

Another trend is fintech companies increasingly offering components of services and technologies that administrators are also building up.

“You see standalone companies and fintech companies coming around pointed specifically at those different problems and capabilities,” Salus says.

Vendors will have to offer an attractive price, but it also puts pressure on admins to continue investing in their systems to stand the test of competition, Sanchez says.

One company offering standalone services is Arcesium, a post-trade tech and professional services firm, which was launched by hedge fund D.E. Shaw Group in 2015 as an independent company. Blackstone Alternative Asset Management (BAAM) provided equity backing and became the firm’s second client. Arcesium announced last week four parts of its tech platform are now being offered as standalone products for alts managers, including financial data stack tools, reconciliation, swaps management, and a treasury suite. The firm – which has over 700 employees and supports over $100 billion in assets – plans to hire over 100 employees in the next year with a focus on software engineers, according to a source familiar with the matter.

“The standalone offerings are a natural evolution of our business. We built our full technology platform to better support the most complex operational demands of some of the largest asset managers in the industry,” said David Nable, head of commercial strategy at Arcesium, in an email to FundFire. “This demand for innovative technology in the fund admin space will only increase, and, by offering portions of our technology platform á la carte, we’re responding to the challenges that managers face when it comes to operations and data management.”

The focus on technology comes after a record year in merger and acquisition activity that saw large players including Apex Group, State Street and SS&C Technologies all make moves. And the start of 2019 has already seen some activity with Apex Group and its private equity backer Genstar Capital announcing the acquisition of Link Group’s corporate and private client services and Throgmorton businesses at the end of January, according to a release.

And more acquisitions are likely to come as firms look to expand their geographical reach and product lineups, including in areas such as the private client space and corporate securities, Salus says.

“The momentum, the desire, the money is there. It’s just sifting through and finding the right opportunities to take advantage of,” he says.

Contact the reporter on this story at ltomkiw@fundfire.com or 212-542-1278.

Fund Admin Acquisitions Near Record Pace with Apex Deal

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It’s full speed ahead for mergers and acquisitions activity in the alts fund administration space with Apex Group making the latest move, acquiring Custom House during a busy summer period that has 2018 already outpacing 2017 in the level of activity.

The Custom House acquisition – announced Monday and set to close at end of the fourth quarter – adds $24 billion in assets under administration, bringing Apex Group to $560 billion in assets under administration. Apex announced the deal along with its private equity backer, Genstar Capital, but did not disclose the terms of the deal. The Custom House acquisition adds to Apex’s hedge fund service arm, with both firms sharing “common hedge fund technology platforms,” according to a press release.

The deal, which increases Apex’s geographical footprint in Europe, Asia, and the U.S., will have Custom House CFO Helen Breen and COO David Barry remain with the firm but CEO Mark Hedderman leave, says Rosie Guest, global marketing director at Apex.

Apex is expecting to make another few acquisitions this year and into the first quarter of 2019, with two deals currently in negotiations, Guest says. “The target over the next five years is to break the trillion [dollar] mark,” she says.

The rate of acquisitions is likely to make 2018 one of the busiest years on record, with 11 transactions already clocked this year compared to 10 during 2017, according to a list tallied by Fund Recs, a cloud-based reconciliation software firm that works with fund adminstrators. That total list includes acquisitions of technology firms, but even the pace of acquiring fund administration players alone is up, with eight deals so far this year.

“The numbers are up more year to date than we have seen last year. One big trend is the technology side of it,” says Alan Meaney, CEO of Fund Recs, noting that technology deals have totaled $9.45 billion in value so far in 2018.

Apex’s latest move comes as the firm aims to become the largest independent fund administrator in the world. The firm has been on an acquisition spree, announcing in June its acquisition of private equity administrator Ipes, in January its acquisition of M.M. Warburg & Co.’s asset management and servicing business in Luxembourg, and in October 2017 its acquisition of Deutsche Bank’s alternative fund services business, as reported. The firm also added to its U.S. team with additional hires announced in July.

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Other administrators are also making moves, both acquiring fund admin peers as well as technology companies. SS&C Technologies announced its acquisition of the North American business of CACEIS, aCrédit Agricole division in March, as well as several technology deals, including Eze Software in July and tech and business operations provider DST Systems in January. State Street acquired Charles River Development, a provider of investment management front office tools, in July.

It’s a positive buyer’s market in the fund administration space, with many firms looking to build up a U.S. presence or increase their private equity capabilities, says Bill Salus, CEO of Paddock Consultancy, which focuses on the fund administration market.

“I think [consolidation] is going to continue at all points in the market,” he says. “Large admins, medium sized admins, and smaller… There continues to be a proliferation in admin firms coming to market. And while the overall market is growing, and there’s even more of a trend to outsourcing more of a manager’s middle and back office, the service providers struggle to keep up with that technology trend – and either face lower growth or don’t have enough scale to plow back into R&D and technology.”

And while summer has traditionally been a quieter period, there are more deals coming, Meaney says.

“I think it’s worth keeping an eye out for a couple more big deals to be done by the end of the year,” he says.

Contact the reporter on this story at ltomkiw@fundfire.com or 212-542-1278.

Automation Speeds Up as Hedge Funds Push Admins on Tech

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The robots have arrived. They aren’t out of a sci-fi movie, but rather are working on the growing demands from hedge fund managers for their fund administrators to incorporate more technology, automation, and robotics into their processes.

Hedge fund managers are increasingly asking for a range of performance information and analytics, including daily net asset values (NAVs), data aggregation and transparency for limited partners, as well as data for regulatory and compliance reporting, says Bill Salus, CEO of Paddock Consultancy, which focuses on the fund administration market. And that’s causing a “massive shift” in the technology that administrators have to offer clients.

The move to incorporate greater technology and automation comes as hedge fund assets under administration have continued to grow, hitting $4.3 trillion for the first time earlier this year, as reported.

Robotics process automation and back offices are a “marriage made in heaven,” says Jon Hugill, group information systems head at Maitland, a fund administrator.

“I think between robotics and blockchain, the fund administration industry is in for an enormous upheaval. There is so much work that is relatively low value but requires a person at present to be part of the process and robotics is going eliminate a huge amount of that,” he says, adding that it will allow for people to work on other problems and devote time to clients.

Maitland introduced its first “robot” named Eric in late April in its South African office. “It’s not R2-D2, it’s just a piece of software that runs in the background,” Hugill says, adding that it works on areas such as fund accounting and data capture and allows the firm to get work done outside of standard hours.

For hedge fund managers, the increasing use of technology across the space will mean that the quality and “the speed at which NAVs are struck will improve dramatically,” he adds.

New areas of the hedge fund landscape are also offering opportunities to build new interfaces. To manage the rise in cryptocurrency hedge funds and their often disparate and non-standardized data, Gemini Hedge Fund Services built a cryptohub to interface with all the major exchanges and to streamline data in order to more efficiently process funds, says president David Young.

“From a fund administration perspective, it always comes back to the quality of reporting. It’s depth of reporting [and] speed at which we report – and obviously automation is an important part of both,” he says.

The automation push is also changing the hiring landscape of the admin field, Young adds. “We do use more business analysts than ever before than just pure accountants to better analyze what we are doing with our data and better use and control the data.”

Overall, the fund admin industry is looking at faster, more efficient technology and better ways of looking at data so managers can understand how their businesses are doing, says Mike Megaw, managing director and global head of analytics and regulatory solutions at SS&C Technologies.

The next frontier for the fund administration space will be digging deeper into the possibilities of blockchain, he adds.

“I think there’s promise there. It’s hard to say when it’s going to have the impact. It’s obviously the buzzword – blockchain and [artificial intelligence] are married together… The timeframe of when [blockchain] actually plays out depends on how soon it finds the right problem to solve and the adoption of that,” he says.

The introduction of new technology and automation will continue to be an ongoing process of evolution and not an immediate revolution, Young says.

“It’s a lot different than it was 15 years ago in the fund administration space and the automation is reflected in the fees investors and managers pay to administrators today. It’s significantly less than it was… The cost savings has been passed on to the end user – the investors, which is where it should go,” he says.

Contact the reporter on this story at ltomkiw@fundfire.com or 212-542-1278.

NES Financial – October 2017

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NES Financial Announced as a Sponsor at the Third Annual Privcap Game Change: Real Estate 2017 Event

Silicon Valley FinTech company showcases innovative fund administration solution for private equity real estate industry

Silicon Valley, CA, October 24, 2017 – NES Financial, a market innovator in fund administration solutions for the private equity real estate industry, will sponsor the third annual Privcap Game Change: Real Estate 2017 event on November 2nd at the Mid-America Club in Chicago, IL. NES Financial will be hosting a keynote event with industry leader Bill Salus and emerging markets veteran Tom Heneghan.

This conference is a learning and networking event focused on the trends that will shape the future of real estate. For investors, fund managers and their advisors, this conference will offer in-depth analysis of the game-changing trends affecting institutional private real estate investment.

Bill Salus, an NES Financial Advisory Board Member and Founder and CEO of Paddock Consultancy, will be conducting a keynote interview entitled Emerging Markets: It’s Time to Take a Fresh Look.

The 30-minute interview will feature industry veteran Tom Heneghan (CEO of Equity International), who will share his insights, analysis and approach to emerging markets investing; his outlook on regional opportunities around the globe; insights for Western investors to consider as they commit to developing markets; and the challenges of dealing with currency fluctuations and other risks. There will be a short Q&A with the audience following the interview.

In addition to hosting the keynote interview, NES Financial will be showcasing their latest suite of technology-enabled fund administration solutions for the private equity real estate industry.   

About NES Financial
NES Financial is a Silicon Valley financial technology (FinTech) company providing technology-enabled solutions and services for the efficient back- and middle-office administration of complex financial transactions. Serving private equity, commercial real estate, and Fortune 1000 clientele, NES Financial offers industry-leading fund administration, loan servicing, specialized EB-5 administration, and 1031 tax-deferred exchange services. Our unwavering commitment to data security, operational redundancy, and compliance reporting is evidenced by 12 consecutive years of successful independent audits of our technology, processes, and financial controls. Today, NES Financial services over 190 funds, administers over $75B of 1031 assets annually, and has worked with over 550 EB-5 projects. For more information, visit nesfinancial.com.

About Bill Salus
Bill Salus is an NES Financial Advisory Board Member and Founder & CEO of Paddock Consultancy. Named in Global Custodian’s Securities Services Hall of Fame, Bill has over 30 years of experience in sales, management, and consulting in the global investment and financial services industry. Most recently, he served as Global Chief Executive Officer for Apex Fund Services, a leading fund services company. Bill has also held senior positions at BNY Mellon, PNC Global Investment Servicing, KeyCorp, and Bank of America. In addition to his industry work, Bill serves on the Finance Committee for the Ronald McDonald House of Wilmington, DE, and is a member of the 2017 Committee of Hearts, Hedge Funds Care. Connect with Bill on LinkedIn.

About Tom Heneghan

Tom Heneghan is CEO of Equity International (EI), a Sam Zell controlled entity investing outside of the US, primarily Emerging Markets. Recent investments include companies in warehouse, hospitality, self-storage, parking and telestructure segments throughout LatAm, India, China and Japan.  Previously, he was CEO of the Zell sponsored Equity LifeStyle Properties, Inc. (NYSE:ELS). From 1990 to 1995, he was with EGI, the investment company founded by Mr. Zell. Mr. Heneghan is Vice Chairman of ELS and is a board member of Home Partners of America, a single-family rental business and is a board member and a member of the Investment Strategy Committee of Chai Trust, a trust company overseeing trusts for the benefit of Mr. Zell and his family.