Here are some key quotes from my latest podcast with industry veteran Bill Salus, CEO & Founder of Paddock Consultancy, discussing the current and future state of the fund administration business.

“Fund administration has the same fundamental components. It’s the accounting for the fund and the accounting for the investors that are coming in and out of the fund.”

“I think the fundamental difference is that the information that sits within the investor community and sits within the fund itself is very, very much more in demand today than it was before and [more] than the accounting data. So the industry has changed really, from being a fundamental accounting-oriented business, to now more of a data-oriented business.”

“And so the administrators’ onus has been changed to not only providing pure accounting information, [but to] providing transparency directly into the investments and what the investments are about, and just more and more information for the investor.”

“It’s very, very difficult, I think, for administrators to distinguish themselves. Most administrators try to distinguish themselves from the knowledge they have and the people and credentials that they have working with the managers or technology.”

“But what you’ll find more is an attention to specific expertise by the administrator for specific investment strategies, geographies, and information that it can provide to not only its general partner customers, but for their investors.”

“This business is really, at the end of the day, a very personal decision between the manager and the trust and relationship it has with its fund administrator.”

“The first thing that a manager needs to understand is, can the fund administrator actually handle or has experience with its investment strategy? If it’s real estate, or infrastructure or credit, high volume hedge trading, derivative trading?”

“With nearly 700 administrators around the world, clearly, managers get comfortable with smaller administrators, more boutique, more white-glove type of service that they’re looking toward that fits their investor base and their investment strategy.”

“The interesting [thing] is that managers are looking for more than just fund administration services to outsource. They’re looking now across their entire infrastructure as a ground for outsourcing. Administrators are trying to respond to that, rather than stay within the accounting area or the back office of the fund area, trying to get upstream into the middle and front office of investment managers and attract new revenue pools.”

“I think that managers – to our point around aggregation and the M&A activity in the space – [should] expect to see some turmoil. Administrators are building, they’re growing, they’re acquiring, they’re integrating. And, oh by the way, they’ve got to keep on top of all of the professional services side of this business.”

“I think in 5 to 10 years, what you’ll see is the administration business as it has previously been defined fadeaway. I think the lines around the box of providing fund services will blur or provide a holistic suite of services for investment managers.”