Fund Administration Business in Europe
An alarming survey published in August 2008 revealed that almost 30% of fund administrators in Europe would see a cut in revenue in 2008. The respondents were slightly more optimistic for 2009, as 24% expected a further reduction in 2009. Other worrying statistics to come from Deloitte’s survey were: 44 percent are pessimistic about the short-term outlook of the fund administration industry; but 85 percent were optimistic within a two-year timeframe.
“The mixed outlook over the short term indicates that the fund administration industry is feeling the pressure of the wider market turbulence,” said Brian Forrester, a Financial Services Partner at Deloitte Ireland and the author of the report. “Ireland, as a major player within the administration industry, cannot expect to be immune from this. Already we have seen reductions in staff numbers here, and the emphasis for Irish administrators must be to assess their business models and act now to increase efficiencies in order to maintain service levels for their clients whilst managing their own profit margins which are under significant pressure.”
Respondents noted the decrease in assets under administration as the most significant impact of the credit crunch. The second most pressing concern facing the industry was cost containment. With the fall in revenue and a high fixed cost base there is little wonder why administrators want to focus on reducing expenses. However, administrators also signaled they hope to maintain a high quality of service despite cost-cutting measures.
A high 83% of respondents anticipated a decrease in new hires compared to past estimates. Another noteworthy result of the survey was that many fund administrators have started focusing on outsourcing. By moving elements of their operations either out of their home state or to specialist providers, administrators hope that they can reduce some of their costs. The overall conclusion from this survey seems to be that fund administrators have been hit hard by the credit crunch and as things have not recovered in 2009 it is an uneasy time for the industry.
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Source: Deloitte
