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‘Higher burden of proof’ on Asian startups raising capital says BNY Mellon’s Andrew Gordon

December 16, 2010 at 2:05 pm

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BNY Mellon continues to win new business, as its Q3 figures testify to: strong growth in assets under custody (+12 per cent) and assets under management (+9 per cent) helped it earn USD622miPARA_BREAK_SENTINEL_9f8e7d6c

BNY Mellon continues to win new business, as its Q3 figures testify to: strong growth in assets under custody (+12 per cent) and assets under management (+9 per cent) helped it earn USD622million. When it comes to servicing hedge funds, the bank offers comprehensive solutions, principally through its integrated administration platform. And as Asia’s alternatives industry evolves, in tandem with more disciplined investor demands, the realms of fund accounting, risk mitigation, compliance and custody are becoming key issues. Speaking to Hedgeweek this week, BNY Mellon’s Head of Broker-Dealer and Alternative Investment Services, Asia, Andrew Gordon (pictured), said that a lot of what the bank does is to help clients meet the needs of institutional investors – be they ones they already count as clients or are courting as prospective clients. Which sounds obvious, but when you’re an acknowledged market leader in asset management you’re expected to constantly push the innovation envelop. “Earlier this year we launched the Price Verification Service,” said Gordon. “Every month we independently value a client’s portfolio and reconcile it against the holder of those assets,” added Gordon, explaining that whilst PVS was used mainly in North America, it was nevertheless part of the full fund administration service offered in Asia.

According to Gordon, transparency is the key challenge facing fund managers being asked to provide potentially huge volumes of data, not all of whom can handle the demands. “Clearly as an administrator we help clients manage and report risk for their clients,” explained Gordon. “We’re seeing it first hand – institutional investors are speaking to us and we are spending more time explaining what we are doing.” This, says Gordon, is particularly true in Asia where there’s a “higher burden of proof” on new managers looking to attract investor capital, adding that the mantra increasingly being taken by investors is one of ‘Trust and Verify’ – investors trust their managers but they’re looking for third party verification regarding a fund’s value. “Over the first year of a startup what investors are looking for is not just a track record of performance but also of running the fund correctly,” said Gordon. “It’s the day-to-day tasks that we help our clients with – calculating NAV, portfolio reporting, getting risk reports out on time.”

Gordon admitted that the tough capital-raising environment in Asia had led to a slow start for the bank this year. It was only after the summer that funds began flowing into its Asia-located hedge funds, many of which launched in ’09. Gordon believed AUC in the region would grow in 2011, adding that the bank was speaking to clients with respect to opening custody accounts but counterbalanced this by admitting that certain prime brokers were not seeing a lot of activity in relation to usage of their third party custody vehicles. “Next year we have a healthy pipeline of opportunities, some small, some big, so I’m cautiously optimistic,” concluded Gordon.