Savvy Hedge Fund Service Providers See Record Growth

Dec 23 2008 | 8:43am ET

Hedge funds may be going through a rough patch, but some of the companies they rely on are on cloud nine. Savvy hedge fund service providers say they’ve experienced growth in the face of a downward spiraling market, and they expect to see more of the same in the New Year.

Stephanie DiMarco, chief executive of Advent Software, said her firm has had a strong year, complete with record revenues and bookings.

“We’re doing surprisingly well in this environment and a lot of it has to do with our business model, which is very resilient,” said DiMarco.

Advent currently has some 500 hedge fund clients, which make up about 11% of the company’s revenues.

DiMarco explained that Advent’s products, which include Geneva, a global investment management and accounting product, are necessities and not discretionary items that managers can choose to turn off. She said that the financial crisis has made hedge funds aware of the need for multi-prime brokers resulting in more opportunities for her company.

“With the collapse of Lehman and the sale of Bear Stearns, people are much more concerned about institutional risks. So, if a mid-size fund wants to go multi-prime, they have to be able to do their accounting, so that’s a positive for us.”

The spate of layoffs in the hedge fund space, specifically research staffers, has played nicely into Advent’s recent acquisition of Tamale Software, a provider of research management.

“The need for a centralized database and research management system is also something that we’ve seen people pay more attention to,” said DiMarco.

DiMarco is buoyed by the incoming presidential administration, which is calling for more industry regulation.

“If people need to take greater control of their operations, then we have system to do that,” said DiMarco.

Paul Compton, head of product management for SunGard Alternative Investments, said that his company has benefited the turbulence on Wall Street.

“After Sept. 15, we picked up fair amount of independent valuation service business from counterparties of Lehman Brothers, and, in some cases, second opinions on the notional value of their positions,” said Compton. “These are interesting times and we see opportunities for funds that come out the other side that will be looking at their operations and counterparty valuations. I think there’s going to be a change in attitude in risk management.”

According to Compton, hedge fund revenues made up a small percentage of the company’s $5 billion revenue in 2007. However, he said SunGuard, which currently has a roster of some 400 hedge fund clients, is making a concerted effort to expand its alternative business by focusing on the Middle East and Asia.

“We think there are customers there in terms of sovereign wealth, private wealth and asset management businesses, and we think it is a region where we have products that area good fit,” he said.

Elsewhere, Viteos Fund Services, a global hedge fund administrator, said it continues to garner market share in these turbulent market conditions. The firm said its growth reflects hedge funds’ flight to quality.

“The hedge fund industry is going through significant changes and better operational procedures and risk controls are demanded,” said Shankar Iyer, CEO of Viteos. “Using Viteos, our clients are able to extract value from fund administration, from the simplest elements such as error reduction, reliability and service, to the tangible benefits of cost reduction, productivity, and alpha and business generation.”


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