European Union: Funds Europe Feature: All Under One Umbrella

Last Updated: 3 October 2019
Article by Patrick O'Brien

The acquisition of Viteos shows how Intertrust is reacting to asset managers’ technology needs to support sophisticated product development. Shankar Iyer, chief solutions officer, and Patrick O’Brien, global head of funds from Intertrust, explain more about the drivers in the September edition of Funds Europe.

Catering for a fund management industry that is in a state of flux means fund administrators need to think one step ahead of their clients. This means that fund administration firms have been busy rethinking their own value proposition and ideal service offering.

Innovation in fund administration is crucial and technology needs to be scaleable and seamless in its ability to provide end-to-end processing and a comprehensive view of transactions, operations, legal and risk frameworks.

Fund administrators must also keep pace with the latest developments in AI, machine learning, big data, robotic process automation and natural language processing.

Asset managers, especially the larger ones, also want the ability to select different components of the fund administration offering, or more targeted specialist products and services that meet their particular requirements, according to Patrick O'Brien, global head of funds at Intertrust.

"Technology allows us to be nimble but clients also want more of a consultative solution and a quick turnaround," he adds. "We have to be able to provide a range of deliverables from, for example, full fund administration to reconciliation, regulatory reporting, governance and modelling. The solutions have to be both scaleable as well as specialist. The key is to keep innovating not just the technology, but also the processes and services."

A perfect match

In support of this, Intertrust recently made an acquisition of Viteos. Viteos not only bolsters Intertrust's position on the global stage with a strong US presence, but also unlocks the potential to expand products and services.

Viteos, which has been at the forefront of tech-enabled corporate and fund solutions, was seen as a perfect match. The two companies forged a strategic partnership in March and the merger completed in June, enabling Intertrust clients to tap into a much broader product suite including advanced technology, a digitised delivery model, and a solution-oriented service suite.

Centres of excellence

Viteos has a wide array of solutions that utilise cutting-edge tools including blockchain, robotic processes and the digitalisation/automation of the marketing function. End-to-end middle and back-office administration are provided for top-tier hedge funds, private equity, real estate, private debt and other alternative asset managers.

In addition, Viteos centres of excellence in India will enable Intertrust to fast-track its initiatives around standardisation, centralisation and shared services. The aim is to bring greater improvements and efficiencies to the quality of service.

Similarly, synergies are likely to derive from offshoring selected support functions for client-facing teams, back-office and IT support.

"I would say the merger is almost uniquely symbiotic," says O'Brien. "While other M&As tend to overlap on expertise, technology and offering – ours allows the integration and use of the Viteos technology/expertise to expand the advantages already offered through the Intertrust Global reach service model."

The acquisition sees over 700 employees added, including 130 technology experts. There is a solid financial foundation to the deal, too, with Viteos having revenues of $52 million. Intertrust said it expected the deal to deliver mid-single-digit EPS in the first full year of ownership, increasing to double-digit EPS by 2021, as the merger beds down.

Together, the combined entities have the potential to reach a market capitalisation in excess of €10 billion growing at 4%-6% per annum.

A string of expert hires

The Viteos acquisition follows on from the appointment last year of Stephanie Miller, who was previously global head of fund services at JP Morgan.

Miller has set out a three-year strategic plan to build a fund administration powerhouse with a scalable and secure platform. Mergers and acquisitions were put on the agenda, as well as investments for cost-efficiency measures, business development and new solutions. Organic expansion has also resulted in a number of new hires, which include O'Brien himself.

O'Brien joined the company in May from Citi, where he was head of fund services, Ireland, and head of offshore sales. Prior to that he worked in various roles during eight years at JP Morgan. In total, he has 27 years of expertise working with international fund managers in designing and evolving their businesses to meet investor demands and regulatory changes, and as well as working in alternative asset classes such as private equity and real estate, O'Brien's career has also spanned money market and exchange-traded funds in the Ucits regulatory regime.

His role now is to lead the company's global fund strategy and expand the client base among private capital fund managers and investors in Europe, North America and Asia-Pacific.

O'Brien reports to Ian Lynch, another recent Intertrust hire, who is the former global head of alternative fund services at BNP Paribas.

Clearing obstacles

Additionally, the enlarged company will also benefit from Shankar Iyer, who is Viteos's founder and chief executive. Iyer's main expertise is in developing solutions for the industry's obstacles.

Shankar believes that the prolonged interest rate environment is one of the biggest issues facing the asset management industry due to the difficulty with generating positive performance. It is forcing firms to look way beyond traditional plain vanilla product structures.

This is trend highlighted by several recent studies. For example, the Alternative Credit Council, an affiliate of the Alternative Investment Management Association, shows that private credit alone is set to grow to more than $1 trillion of assets under management by 2020, while PwC has said that alternative assets – including real estate and private equity – could reach the $15.3 trillion mark if low interest rates continue.

Shankar says that with this growing sophistication, investors hope to leverage the benefits of diversification and the different structures available.

"This has meant creating hybrid vehicles which blend various asset classes including cash and liquid securities, distressed debt, bank loans and mortgage-backed securities, among others, under one fund umbrella," he explains.

The "symbiotic" deal between Intertrust and its new business is designed to facilitate this.

This article was originally published in Funds Europe, September 2019 edition here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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