Many of you will know that we publish something of an annual Form ADV review in April each year; we use Form ADV filings submitted between April 1st the prior year and March 30th of the current year, so that we can capture the many advisers with a December 31st year-end that file in the first quarter of the year.

So, this month, we figured we’d do something akin to a ‘mid-year update’, focusing on filings submitted between April 1st and September 30th this year, to see what the lay of the land is with regards to service provider league tables.

In April, we focused on auditors, given that the ‘red flags’ that get raised during operational due diligence when a manager changes auditor always makes for interesting reading, but we’re going to take a look at the other two categories that cut across all private funds - administrators and custodians - are making waves for this update (we’ll come to prime brokers, the SEC’s fourth category, in another update).

We’ve sorted Tables 1 and 2 below by the total number of private funds serviced, because we think that’s a better way to get a snapshot of how widely used a service provider is, as opposed to gross asset value (GAV), where very large advisors and funds can distort the picture somewhat. 

Administrators

What’s most notable here, in our view, is that there isn’t one administrator that features in the top five in each of the five main category options the SEC provides*. Carta leads the way in that regard, featuring in three of the five main categories, and leading overall, as well.

Table 1: Administrator League Tables, by Total Number of Private Funds Serviced, April 1 – September 30 filings

Source: 9AT

*We have excluded Securitized Asset Funds and Liquidity Funds from this exercise due to low numbers

The fund administration market has thrown up a couple of recent news events. First, Gen II Fund Services now has lots of KKR money thanks to its recent acquisition, with KKR saying that “The strategic partnership with KKR is intended to support Gen II’s next phase of growth as private market managers increasingly seek scaled, technology-enabled solutions to navigate more complex fund structures, investor needs and regulatory requirements. KKR plans to work alongside Gen II’s management team to support the company’s continued expansion in the U.S. and internationally, broaden its capabilities across asset classes and services and invest further in proprietary technology and AI-enabled solutions.”

And Carta recently secured authorization to operate as a fund administrator and transfer agent in Luxembourg, further growing the firm’s footprint.

Interesting times ahead in the fund admin space, apparently. 

Custodians

Unlike fund administration, custody remains a scale business dominated by a small group of global banks. Asset managers, both big and small, place enormous value on financial strength, regulatory standing, operational resilience and global reach. Those advantages take decades and billions of dollars to build, which creates quite the barrier to entry for any potential challengers.

That translates to few surprises in the league tables. JPMorgan leads overall and also features in the top five of four of the six categories here. Some interesting reading in the Real Estate category, however, with none of the top five being the large US investment banks.

Table 2: Custodian League Tables, by Total Number of Private Funds Serviced, April 1 – September 14 filings

Source: 9AT

As noted above, the real estate category looks like one to keep an eye on, with the caveat being that if we were to produce this table based on GAV, JPMorgan Chase, Bank of America and US Bancorp all sit in the top five.  

Still, it would appear that, for any budding custodians out there, that the real estate set are more likely to look beyond the brand names when selecting a provider.

Reading Between the Filings

The next time that we check-in on the service provider league tables, we’d wager that the custodian category will produce similar names in the top five. The administrator category, however, is the one to watch here. It will be interesting to see whether KKR’s acquisition of Gen II Fund Services means that it will be more active in fund admin M&A, or whether non-sponsor-owned admins will consolidate, or both, or neither, but regardless, as far as data is concerned, administrators are where the activity is.  

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