You may feel that you are familiar with what the Bank of Bermuda does. After all, it is the most widely held stock in Bermuda and account holders probably visit a branch for one of its retail services at least once a week.

So it may come as a surprise to learn that last year, over 42 percent of the bank's overall revenue came from a division you've probably never heard of - Global Fund Services.

GFS and its 117 staff belongs to an obscure industry known as fund administration. No doubt the term "obscure" may offend some fund administrators, but when it comes to Career Day at school, if anybody's mother or father stands up and says "I'm a fund administrator", they are going to get some fairly blank looks... from the teachers as well as the kids.

The head of GFS Bermuda and Cayman, Allen Bernardo, agreed to try and demystify the field of fund administration. He explains that GFS offers services to companies such as pension funds, mutual funds and alternative funds (including hedge funds.) GFS handles record keeping for the Bank of Bermuda pension plan, for example.

The term "fund" at its most basic level, is a something that allows a group of investors to get together and invest in a wide range of investments, allowing them diversity without having to invest in hundreds of different securities.

Fund administration allows investment professionals to get on with selecting and researching the investments that go into their funds while outsourcing all the back office work.

Mr. Bernardo says that the services can be split into four main categories: accounts and valuation; management services, investor relations and custody. (see sidebar for explanation).

According to Mr. Bernardo, management services and investor services are the biggest growth areas in Bermuda. "We are becoming more focused on those two areas." Traditionally, the fund administrator has limited direct involvement with investors apart from providing them with pricing information and records, but Mr. Bernardo says that they have to be able to explain what a fund's investment strategy is, so there is a limited advisory role.

"In a holistic sense, the bank regards the fund manager as the client, but we recognise the value of good standard investment service to the investors... the scope of this service depends on the amount of involvement of the fund manager."

Mr. Bernardo says that the fund administration market is becoming much more competitive in Bermuda and there has been a great deal of consolidation recently in the world-wide market, for example in 2002, Bisys bought Hemisphere and the Bank of New York bought IFS.

Of the $18.5 billion under GFS's administration, nearly half is in alternative funds, including hedge funds. The growth of the $600 billion hedge fund industry has also stimulated the fund administration industry.

The hedge fund industry has in a way been a beneficiary of depressed equity markets, as investors have seen hedge funds as sources of higher returns. For example, many US insurers are investing in hedge funds according to Mr. Bernardo and GFS see insurers as a potential growth area.

"Convergence is the buzz word," says Mr. Bernardo.

Another growth area is emerging markets: "We are seeing less sophisticated countries around the world implement pension regulations. This will lead to major opportunities for offshore bodies."

But with growth comes increasing regulation. There has already been a surge of regulatory interest in hedge funds and this is likely to spread to the administration industry.

Hedge Funds have escaped close scrutiny in the past on the grounds that anyone rich enough to invest in them must be a fairly sophisticated investor, but both the National Association of Securities Dealers (NASD) and the Securities Exchange Commission have started to look at the industry in more detail.

Further regulation of hedge funds, and increasing demands for transparency may have a large impact on the future of fund administration.

Side:Management Services

They also offer corporate secretarial services - taking care of any requirements of the Companies Act which might mean paying fees and filing information with Bermuda's Monetary Authority and Companies Registrar.

"We are the official registrar of the fund and maintainer of the share registrar." Accounting and valuation

Speaks for itself - all the financial statements and pricing information for the fund. Custody

Think about what goes on behind the scenes when you buy a unit of a fund: a stock broker accepts the offer and even though he has not yet received the purchase money and fees, the trade is taken as having occurred immediately. But how does the company know that you have bought the securites?

In the old days, this was achieved by physically handing over the share certificates, now this is handled by major clearing systems such as Euroclear. Most companies do not even deal directly with the clearing system - it would be extremely expensive to have an individual account with Euroclear, for example. So they pay on a custodian who has an account to be the legal owner of their securities.

On a very basic level, these are the sorts of areas known as settlement, execution and custody which a fund administrator might deal with.

Investor services

Providing investors in the funds with information and keeping records associated with buying selling and transfer of investments; also involves a small element of advice to potential investors.