Private real estate and infrastructure managers are following in the footsteps of their private equity peers that in recent years have bumped up their use of third party fund administrators, largely responding to pressure from institutional investors.
The market for real assets managers using fund administrators is still small at $638 billion, compared to the $2.2 trillion these providers report administering for private equity managers, according to a recent eVestment report. But it’s an area where fund administrators see growth potential for the same reasons that have sparked hires by private equity firms, says Minkyu Mike Cho, senior research analyst at eVestment.
“They certainly anticipate that it’s going to be a big growth area, particularly for administrators that didn’t have a presence in real assets and real estate in the past,” he says. “These firms are now seeing [private fund] firms are more receptive to outsourcing.”
The larger players in the market include Citco Fund Services, SS&C Technologies, and State Street Alternative Investment Solutions, all of which report having more than $100 billion in committed capital from real assets fund managers, according to the eVestment report.
The private equity market’s accelerated push toward hiring third party administrators has played out over the last three years, but the real assets echo has been much more recent, says Bill Salus, CEO at Paddock Consultancy.
“These are tricky assets to account for and manage – infrastructure and real estate – and they’ve been under pressure to be more efficient and less costly,” he says.
The past year has been busier for real assets manager inquiries and business across a range of strategies, says Dennis Westley, managing director for North America at Apex Fund Services. The third party administrator has seen funds that target assets such as residential housing, hotels, and storage units seeking outsourced help, in addition to a larger surge of activity from private equity managers generally, he says.
“That’s something that two or three years ago you did not see quite as much,” he says…. Read More