Executive Q&A: Margins and Demands

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Funds Europe is the business strategy magazine for Europe’s asset management professionals. It covers all areas of the asset management business – institutional and retail markets, traditional and alternative investments, front and back – office – providing essential insight into the European opportunity.

In this month’s edition executives including Peter Hughes, Apex Fund Services CEO and Founder talks about how they fight competition, clients’ demand and major challenges their companies are facing in 2014.

A snippet of the article is reproduced below:

What are the main characteristics of competition in the business right now?

Bundling from the largest banks with an unwillingness to take on clients that won’t take all services. Low cost providers which compete on price but leave their clientele vulnerable to service provider risk as they are not SSAE 16 audited, have poor internal infrastructure and lax operational controls.

What are your clients’ most common demands?

Ancillary services in and around core fund administration (regulatory reporting, middle office, fund platforms, technology, improved investor reporting) to meet the global regulatory tsunami washing over their businesses, and increasing investor reporting demands.

How is your business responding to the pressure on profit margins?

We are conscious of service-level creep. Services must be offered on a commercial basis. We have a transparent pricing model for all of our clients. The market is ill-served by service providers that price below cost in order to maintain or buy market share and this can only end in despair. On the flip side, as a smaller focused player we are a viable alternative for small to medium sized funds with large, high cost providers that see their fund expenses rise, but suffer low levels of service and reporting.

In your view, what are the major challenges facing the business in 2014 going forward?

The main challenge facing new mangers is the inability to raise significant capital. Funds that would previously launch with $100 million now see only perhaps $20 million on day one. Apex has introduced platforms to help lower start-up costs and a capital introduction service to match funds with the scarce fund capital that we can map through our investor portal service. Regulation and uncertainty around it continues to cloud the horizon for managers who don’t wish to spend time complying when they know the goal-posts may move again.

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