Apex’s rapid expansion boosted by the Madoff effect
Stricter regulation has led Bermuda’s Apex Fund Services to be known as “the fastest expanding hedge fund administration outfit in a post-Madoff financial world”.
When it comes to generating business, Madoff “has been the hedge administrator’s very best friend”, an article in the Irish Independent said.
Apex was founded in Bermuda in 2003 by John Bohan and Peter Hughes, called “a financial services guru” by the Independent.
Mr Hughes had asked Mr Bohan, a chartered accountant, then also based in Bermuda, to join him in building an independent fund administration outfit.
Mr Hughes, who is a regular participant with Business Bermuda delegations promoting the Island internationally, helped turn Apex into a global company with 28 offices around the world, including one in Bermuda with around 25 staff.
Mr Hughes told
The Royal Gazette that he believes Bermuda is a superior funds administration centre.
While the two partners remain tight lipped about the current value of their company, the Independent said the sale last year of the fund administration giant GLOBEOP for $880 million, a competitor estimated at five to eight times the size of Apex (which ranks 24th in the world), would indicate the value of the latter at somewhere between $80 million and $200 million.
“No comment!” said Mr Bohan who stresses that no one is selling anytime soon. “Our main goal this year is to break into the top 20 hedge administration companies globally.”
The Independent article last week said Madoff’s flushing of $18 billion of investor’s cash “caused it to rain manna” in Mr Hughes’ sector “by driving predator fearing investors into the arms of independent hedge administration companies like Apex who offer watchdog and ongoing auditing services”.
“Pre-Madoff I’d say around 50 percent of hedge funds had an independent administrator,” the article quotes Mr Bohan as saying. “Post Madoff that very quickly moved up to more than 80 percent.”
“Ten months ago Apex had 280 employees, now the company has expanded to 350,” The Independent article said. “On average since its foundation a decade ago Apex has grown by between 30 percent and 60 perceny per annum and now operates 28 offices around the world while administrating funds worth €23 billion. Most recently it opened a second office in Miami, a second in Guernsey and its first in Montevideo and Tokyo and now has plans to open in Jersey.
“Founded here in Cork from Bermuda, it opened a Dublin office last year pledging 50 new jobs. Its expansion has not gone unnoticed globally and early last year it took the award for the world’s most innovative fund manager in the ‘under $30 billion’ category. The steady pace of expansion also saw Mr Bohan shortlisted for the 2012 Ernst and Young entrepreneur of the year award, thus bringing Bohan and Apex into the Irish spotlight for the first time.”
The newspaper said interest in hedge funds has continued to grow globally, and they are fast moving into portfolio mainstream.
“The promise of higher returns and greater diversity compared with more traditional investment opportunities means that despite their Madoff jitters, investors keep coming back to the well,” the paper said. “The sector has grown in value from $625 billion in 2002 to €2.8 trillion last year.”
Despite the slew of regulations and restrictions brought down on hedge funds since the Madoff bombshell, “the nature of hedging means that it must always maintain a secretive aspect that can never be completely eliminated”, the Independent added.
“That means there will always be scope for a renegade and in turn, the need for an independent policeman like Mr Bohan. In 2008 Europe and the USA’s largest multi billion dollar hedge funds imploded. The result was lots of newly unemployed professionals who inevitably started getting together to make up hundreds of very small hedge funds of their own. The effect in turn was to greatly increase the numbers of firms who would be in the market for our services.
“And it got even better for Mssrs Bohan and Hughes. As part of the Madoff fallout, world financial authorities began to heavily regulate the hedge sector. More regs meant a still greater need for administration services to help investors to cut through the steadily more complicated trading environment.”
The “local” approach by Apex has enabled Apex to become the first independent hedge administrator to open in China, the newspaper noted.
“On top of this Apex has also recently joined up with a leading software company to provide hedge admin software solutions, exclusively to its own clients — another big draw which has made life much easier for its customers,” the paper said.
“And if you don’t understand the notoriously impenetrable concept of hedge funds, don’t fret, because neither do most of us.
“The hedge fund policeman estimates that even the financial sector professionals don’t comprehend them as much as they’d try to let on: From experience I’d say just 25 percent of those employed in the Irish financial services sector today actually truly understand how hedge funds work.”
The article further says the propensity of Irish financial professionals like himself to travel for a few years means that there are hundreds of Irish working in financial services in Bermuda at any one time.
“Cayman and Bermuda are the planet’s hedge fund Harvards and home to 90 percent of the worlds most important fund administrators today,” the paper said. “If you base yourself in Bermuda or Cayman, you not only get to know the system intimately but you get to make the very best global contacts in the field.”