CAN YOU DESCRIBE YOUR ROLE?I am a partner in Merlin Securities Prime Brokerage Sales group, and I am responsible for generating new business relationships with single- and multi-primed hedge funds and family offices. WHAT DO YOU LIKE ABOUT THE HEDGE FUND SECTOR? When real forward thinking is in short supply, I often admire the entrepreneurial spirit of the managers that I meet every day, as well as the high quality of people that the hedge fund industry attracts. Hedge fund managers tend to be among the brightest people in business. They are also some of the most philanthropic in the financial services sector. IF YOU WERE DOWN TO YOUR LAST £100, HOW WOULD YOU INVEST IT? We all know that the markets can have their short-term problems, but I’m a big believer that the long-term investor will benefit in the end. So with my last £100 I would select a basket of domestic and international mid-cap growth equities.

WHAT KEEPS YOU AWAKE AT NIGHT? The hedge fund industry never sleeps! I am always thinking about how I can assist my clients in growing their business. WHO DO YOU MOST ADMIRE IN THIS INDUSTRY? Oddly enough it’s not a manager – but someone who has done an awful lot of good for the global financial services sector. If you need a hint just look at the twin monitors we all sit in front of these days! Michael Bloomberg is a vision-ary who has shaped the landscape of the hedge fund industry. The company that he founded, Bloomberg LP, is dynamic and provides hedge funds with many analytics that they need to succeed. WHAT WOULD YOU DO IF YOU WERE IN PRESIDENT OBAMA’S SHOES? I would walk a careful line on regulation as it can have long-term negative implications for entre-preneurs and the markets. Establish a summit with leaders of the broker dealers throughout the world to discuss what will benefit the alter-native investment industry and what changes are in our customers’ best interests. ■

THE WEEK IN QUOTES

“You cannot imagine what broke lose hereafter BaFin’s announcement” The German regulator’s ban on naked short selling caught everyone by surprise, Johan Kindermann, a capital markets lawyer at Simmons & Simmons in Frankfurt, tells Bloomberg

“I am very pleased the Council’s minutes refl ect the

concerns I had”Chancellor George Osborne looks for positives after the AIFM Directive is voted through the EU Council against

the UK’s wishes

“This is a transformational step for GLG” Noam Gottesman, chairman and co-CEO of GLG Partners, approves his fi rm’s sale to Man Group

MY LIFE IN HEDGE FUNDSANDREW L BROWN, partner, Merlin Securities

12 hfmweek.com 27 May - 2 June 2010

Administrators are the only source of independent data on the fund. They are the best placed to meet the demands from institutional investors and regulators”

panies can be an excellent investment, especially in current times where the role of the administra-tor is being redefined and valuations are low.

There are certain broad characteristics that make administrators an attractive investment:

Sticky customer relationships.Administration contracts are very hard to win and once won, equally hard to lose. Research from TABB group highlights administrators as one of the most important hedge fund counter-parties and changing administrators is something that no fund manager would undertake lightly. From the standpoint of an investor in the admin-istration company, this is an ideal profile.

Predictable process that lends itself to efficiency. An administration company is basi-cally an operations business. It makes money pro-viding a very carefully structured service, using a complex technology platform and employing highly trained staff to deliver expected output. However, at its heart there is a repeatable process which is amenable to six sigma discipline. This means that the process itself can be engineered to optimise cost, service, timeliness and accuracy. This makes an administration business highly scalable with very strong operating leverage – again very attractive investment characteristics.

Globalisation of demand and supply.

AKSHAYA BHARGAVA outlines why administration fi rms make for an attractive investment proposition

COMMENT&OPINION

W ith the current spate of fund man-agement M&A activity dominating the headlines, few will have noticed that the hedge fund administration

sector is also undergoing a period of consolida-tion. You only have to look at the new, absent and compound names in this issue’s HFMWeek AuA survey (p17) to see the industry evolving,

as funds and investors expect to deal with bigger businesses, with better balance sheets.

Yet still, and despite this activity, alternative fund administration is a segment that only a few people outside the industry truly understand. It is seen as a black box (incorrectly), complex (cor-rectly), non-scalable (incorrectly) and with low margin activity (incorrectly). Fund admin com-