FOUR QUESTIONS – JTC Group’s Michael Richards and Wouter Plantenga on “New Fund Administration,” and the best kind of hockey
This is the first in a series of Q&A’s with leaders in the fund and fund services industry. We’re kicking off this series with Michael Richards and Wouter Plantenga of JTC Group, a global fund administrator headquartered in the Channel Islands since its founding in 1987. The team there are award-winning providers of fund, corporate and private client services to institutional and private clients.
JTC Group recently acquired NES Financial, where Michael Richards serves as Head of Fund Administration USA. That not only brought Wouter – who is the ICS Head of Group Client Services at JTC Group – together with Michael. It also brought together the two businesses to form a global powerhouse operating in 19 countries, servicing more than $130 billion in assets with more than 900 employees.
Private equity and fund deals are generally reported to be down during the pandemic, which is to be expected. Are things quiet on your end? This probably isn’t a good time for funds to review their fund administrators, or look for third party fund services in general?
Michael – Deals may be down, but raises among funds, and funds of funds, are up and healthy. In fact, that’s triggering a lot of asset managers to decide whether they want to continue to handle statement processing internally, or whether it’s triggering a review of the quality of their current outsourced operations to see if their partner can still scale with them.
We’re having a lot of conversations that start with “we’re launching a new fund,” which then lead to new business for us. Our current clients seem to be very happy with us and the edge we provide them.
Interestingly many of these new funds that are being launched, and are coming to us, are being driven by asset managers who are focused on raising money to invest in distressed real estate in particular. The pandemic has led to new attention there.
Wouter – Asset managers see an awful lot of opportunities out there right now and are taking in capital. However, they want as little of that new capital to go into administrative tasks as possible, which investors do not want to see this happen, either.
They’re tapping into new investors who want managers to focus on what they are asked to do, investing investors’ capital and not doing fund accounting. Besides, managers are cognizant that little things like cap statements that aren’t quite right, or slow, can make a bad impression. So, now’s the right time to have a conversation with your current fund administrator and ask if they can do better, or to look for outside help to bolster what you do internally. These internal conversations are accelerating, particularly during this pandemic.
Is statement processing a pain point? Seems like funds are looking for a team of very solid accountants and people that understand the nuances of the business.
Wouter – Yes, that’s right. They want top drawer fund services professionals who aren’t learning on the client’s dime. Global expertise is an enormous plus.
But the problem is how many of those stars do you have on any team. And how much of the overall workload can be done through cobbled-together automation technology, or worse yet, spreadsheet macros that don’t live up to the promise of the experts who pitch the business?
And maybe a portion of the work can be done in a so-so manner, but the more funds and investors you have, the more you have those high touch situations that require an eye for experienced details. Do you have enough high-quality people to scale?
Michael – That’s why a lot of the conversations we’ve had start with fund administration, and then end up turning into data operations discussions. Asset managers are hiring more sophisticated technologists, and they’re increasingly good at spotting fund administrators that are all talk when it comes to technology and data management, and which ones are proven.
Funds are now zeroing in on top professional services talent supported by a technology stack and even machine learning that take those top-level professionals and extend their power.
I’ve heard something called “New Fund Administration.” If we’re seeing the emergence of New Fund Administration, what should it look like, and how would it be different from legacy fund administration?
Michael – I think you’re talking about a variation of Specialty Financial Administration, which JTC Group’s NES Financial business pioneered. There are certain areas of fund administration that you simply can’t profitably service in a traditional manner. You have to have a purpose-built technology stack from the ground up that can handle the volume, velocity and level of complexity that a legacy fund administrator can’t handle while keeping the lights on.
Opportunity Zones and the EB-5 program represent areas of finance that have those characteristics. However, once you have a technology and data management engine that provides you with a solution to solve those challenges, it can really perform better than traditional fund services in any environment.
Wouter – I would also add that what allows the technology stack to really show its capability is exceptionally talented domain experts whose prowess can then be scaled through that technology The fund or asset manager doesn’t really see the technology. They see the talent, and the talent – often housed in a culture of shared ownership – performs amazingly well in contrast to legacy fund administration.
We’re only seeing what we could call New Fund Administration emerging now. A lot of people in the industry have been talking about blending talent and technology for some time. But for a number of reasons, it’s not done well, however we’re starting to see firms emerge who are getting it right. Frankly JTC Group is a prime example.
Final question, is hockey better played on ice or grass?
Michael – Ice, though our team in Rockland, Massachusetts will take on anyone from Montreal on either surface…or any surface. We don’t forget 1955.
Wouter – Ice hockey is a fine sport, but you have to see Dutch field hockey in its prime. I’ll save the ice for my drink.