Bermuda’s Apex rises to the top of global service providers
The march to world domination may be predicated on the simple formula of putting the client first and providing for them at the highest standard.
Quality of service was at the very core of the origins of the Apex Group.
Observing inconsistencies was how Peter Hughes crystallised an idea to build a company, now transformed from a Bermuda-start-up to a study in international excellence.
Today, the group services the world’s largest institutional asset managers representing trillions of dollars in assets, and, is one of the top two service providers globally for alternative assets.
The group is still taking steps to get bigger and better.
Their business is providing business services to business. And they don’t just want to be the biggest. They want to be the best.
Apex is a global leader as an independent provider of outsourced financial and corporate solutions for asset managers, financial institutions, family offices and other major players.
They provide fund services, digital banking, depositary, custody, super management company services, compliance solutions, corporate services, and a pioneering ESG ratings and advisory service for private companies.
Peter Hughes started Apex in 2003 after a couple of years at KPMG Bermuda, several years at Hemisphere Management and then, as CFO of a fund-of-funds business.
In this latter role, he was read-in on reports from the various service providers working for the funds.
He noticed something.
“The lack of consistency, quality and timing from the various funds’ service providers,” he told The Royal Gazette, “made me realise that there were a lot of players out there who were not providing service at the highest levels.
“I thought it was an opportunity to look after the smaller and medium sized asset managers who were not getting great service from the large institutional service providers.”
And that’s how he started his business, exploiting that gap in the market, concentrating initially on the small and medium-sized part of the market, and later, taking on more top end business, servicing the largest institutional asset managers.
“Apex was founded with clients at the heart of its strategy. Since 2003 we have been focused on evolving our business to deliver more and better services to clients no matter where they are in the world.”
Apex’s dramatic growth has been a dizzying array of transactions – partnerships, acquisitions and equity investment, such as the one in 2017 by Genstar, the California-based private equity group.
The deal involved a recapitalisation of Apex Fund Services with Genstar and an increase in what Apex could provide through the acquisition of Bermuda-based competitor Equinoxe Alternative Investment Services, itself with office operations in six other cities.
Peter retained a significant equity stake in the company, but he said Genstar’s arrival was great timing.
“I had been running the business I suppose for 14 years at that point. I had a growth equity investor come into my business in 2011. So, I had a smaller private equity group invested, and it was their time to exit.
“And then I wanted to make sure that I could continue the growth phase of our business. I was still relatively young at that point and nowhere near considering retiring or anything like that and so it made sense to bring in another private equity group to really try and scale the business further.
“And that’s what we’ve been really doing for the last four years.”
“We are very proud of the progress we have achieved together with Genstar’s support, building an unparalleled breadth of product, and scaling our geographic footprint while maintaining exceptional levels of client service and retention.”
Was it a strategic decision to start Apex in Bermuda, or just a function of where he lived?
“A bit of both,” he conceded. “I had a personal connection to Bermuda having been here for a few years at that point.
“But also, at that time the island was a big funds servicing industry. It had about 1200 people servicing funds and it was one of the leaders in terms of developing fund servicing.
“That was 2003 to 2005. It was really a vibrant place to run a business like this because of the growth of that funds servicing business within Bermuda, then.”
Busy building a business, he still carved out time to help promote Bermuda as a destination for international business, travelling with the now defunct Bermuda International Business Association (BIBA) and others from the Bermuda market.
He told us: “It’s that personal connection to Bermuda. I want Bermuda to be successful. It’s a fantastic place to live and do business from and I was also expanding my business at the same time into the same places as BIBA was at the time.
“So it made sense to have that support and really try and send a message out globally about what a good place Bermuda was, for doing business. And particularly then, it was servicing funds, as well as the insurance side.
“The fund servicing business has obviously declined significantly since the financial crisis in Bermuda, but we have maintained our business, and actually grown our business here in Bermuda over those years.”
Growth, spectacular growth since the 2017 Genstar deal, has included acquisitions. How many?
“I think it’s been somewhere between 25 and 30 over the last four years. So, it’s had pace and that is really all about expanding the products that we have, making sure we cover all the geographies globally. We’re not just buying businesses to buy businesses and get bigger. It’s actually quite a thoughtful process behind it, where each one adds value to whatever else is already there.
“But the last 12 months have been really, I suppose, impactful in terms of the businesses we’ve been able to buy, and the scale we’ve been able to reach.
“… I think we’re about $2.2 trillion of assets that we service, which puts us as the number one or number two service provider globally for alternative assets.
“It’s important to have the scale as well as the quality of the offering, which is what we’re trying to do under our brand.”
One of the latest acquisitions is huge – the all cash, $2.07-billion (1.51-billion pound) offer for British asset management services provider, Sanne Group Plc.
Before the Sanne transaction, headcount had already grown from 600 staff in 2017 to 5,000. Office count over the same period more than doubled from 24 to 50.
AuA growth since backing from Genstar had gone from $50m AuA in 2017 to $1.5trillion in 2021.
Just this year, acquisitions were spread across nine countries, including GFin (Mauritius), FundRock (Luxembourg), Tzur (Israel), Mola-administration (Germany), GCG (US), ARM (Switzerland), Mainstream (Australia), Senasen (UK) and BRL Trust Investimentos (Brazil).
Announced in August, the Sanne transaction is expected to close in the first half of next year.
“I’ve always wanted to do a transformational acquisition,” Peter told us. “This was always top of my list in terms of quality business with global scale, which complements what we have already built. Adding another 2,000 people into our business and their quality clients is a really strong fit for us.”
There were reasons for this deal on other levels.
“They were one of our strong competitors, but they had businesses in jurisdictions we we are not in, and they had incremental product solutions which we do not have, as well as a very strong overlap of clients, which complement our set of clients.
“Their top 20 clients are different from our top 20 clients. And they are focused on the real estate servicing and private debt servicing, whereas we’re strong on private equity and more open-ended fund structuring. So, it’s a very nice fit.
“They are a well run business and they’ve had great growth and traction over the last eight to ten years. And I’ve known the previous management - before they became public - so I’ve had a respectful, competitive position against them.”
Global investment firm Carlyle and sovereign investor Mubadala Investment Company took minority stakes in the business in July. Carlyle was building on an earlier preferred equity investment from November.
In June, global growth private equity firm TA associates completed a significant minority investment.
But with all of that, the Sanne transaction and other moves, there seems to be little time to take a breath.
He tells us: “That really sets the framework to almost start again in terms of the journey of building the business and creating value and enhancing the offering for another four to six years.
“It’s almost sort of winding the clock back and working out how we can evolve as a business into being stronger.”
One focus involves ESG (Environmental, Social, and Governance), ensuring the company is principled, ethical in everything from how the group treats its staff, the environment and understanding important causes like climate change.
Peter told us he is passionate about such things and sees value in also working with asset managers and re\insurers towards a common cause, beneficial to the environment and social governance.
“If they know how they are performing, they can always improve and that’s going to be great for our children and their children.”
Apex’s Bermuda clients in insurance and reinsurance he sees as good candidates for ESG consulting.
Peter said: “I’m keen to see if we can work with them more around screening their companies from the ESG point of view, so they can work out what the right level of premium there is, because ESG is a risk.
“I would encourage the insurance industry to really recognise it as a risk and adjust their premiums based on whether companies have the right ESG behaviours or the wrong ones.
“I certainly don’t agree with not insuring companies that are mining, for example, because there still will be that need. And it is worse for the globe if those companies go uninsured, but you can have the right level of insurance to make sure they have the right best practices.
“I think I really want to work with the insurance industry around that piece of it, which is actually ESG and changing the climate change effect and really trying to make a difference there, which is personally important to me.”
He maintains a hands-on approach over the growing list of companies, which has meant a lot of corporate travel over the years.
But the pandemic has meant more video conferencing over the last 18 months, the efficiency of which he likes from a Bermuda home base. Less air travel, he says, is better for the environment.
Did the lock downs, disruptions and dislocations hurt business? To the contrary. The global stress test had a positive effect on the group.
“We were actually able to grow our business,” he said. “It grew 13 per cent in 2020 and its growing strongly again this year.
“It was a challenge to be able to move to remote working, working from home. I think the biggest challenge will come when you begin bringing people back to the office.”
He added: “I think it has really taught everyone how to work differently, just as effectively, if not more effectively, and it has been a really positive thing for our business to be thoroughly tested and come though the other side.”
Some people prefer the office, while others like working remotely. Figuring out when to get staff back into the office will be hard for businesses, he suspects. No decision will fit or please everyone.
“It’s a very difficult challenge running a business and getting that right. And it’s going to be a decision you’re going to make, knowing it’s going to be wrong for some people. Some are very productive working from home.”
He sees office life best for training, camaraderie, culture, mentoring and also, in many cases, mental health.
“That’s a really big issue when people are working at home, particularly if they have been in lock-down, when they are single people, for example in not very big accommodation.
“We have a team in India where that’s been a real challenge for us, when a lot of our population are 25 year olds and 35 year olds. That’s a hard challenge for them. It’s a really complex decision, and we’re trying to make the best decision we can.”
English-born Peter Hughes has a not-for-profit eco-lodge in South Africa, to protect the environment and preserve endangered species.
He also told us: “I want to be involved in making Bermuda a greener place, with no single use plastics, and be involved in other areas where Bermuda can be a shining light, a carbon-neutral economy built around best practices.”