Last month, SGG Group (SGG), a leading global investor services firm, announced the acquisition of Augentius, a leading global provider of alternative investment solutions to the Private Equity and Real Estate communities.
Augentius, who employs over 650 professionals, offers a complete suite of fund administration, depositary, regulatory and compliance solutions to institutional investors across 13 jurisdictions including the UK, Guernsey, the US, Luxembourg, Singapore and Hong Kong.
The transaction, which is subject to regulatory approval, reinforces SGG Group’s position as the fourth leading investor services firm in the world with the deal growing its assets under administration (AuA) to over USD 400 billion and further strengthens its reach and footprint.
SGG has three main business segments: a fund services business, a private client business and a corporate business.
“We see growth rates in the funds business at 50 per cent higher, with overall global growth in the market being 7 to 8 per cent, whereas in the private client space it is around 5 per cent, and in the corporate space (including multi-nationals and SMEs) it is reasonably flat. So the funds business is a key strategic growth area for SGG,” comments Justin Partington, Group Fund Solutions Leader in SGG’s Luxembourg offices.
Market regulation continues to drive opportunities for fund administration groups, either in the formation of new fund structures or the additional reporting requirements, or indeed in respect to outsourcing, as fund managers look to farm out either some or all of the work to meet regulatory compliance demands.
Another factor, says Partington, is the increased globalisation of funds.
“Funds are increasingly multi-jurisdictional. As such, we need to make sure we have an operating platform in more geographies. The Augentius deal is a way to ensure we have the right scale in the right places where clients need us to be to service them. We see fund managers in what is a fairly hot deal market moving in to new sub-asset classes to find value for their strategies and that means we need to increase our service capabilities both from a geographic perspective and asset class perspective.”
Backed by Astorg, SGG Group has made a number of acquisitions over the last two years to extend its lead in the investor services industry through a complete offering across a number of jurisdictions, technologically advanced services and expert teams, and has an ambitious strategy for continued growth.
The services offered by Augentius will complement SGG Group’s current funds offering, including a state-of-the-art technological platform and experienced team with the reputation of providing high quality service.
As the Group Fund Solutions Leader, Partington’s role is to lead SGG’s funds business in terms of strategy, identifying new products and services in different jurisdictions to drive top line growth, and to look at the tools SGG uses on its platform to deliver efficiency to clients.
Prior to the Augentius deal, much of SGG’s client book was predominantly focused on private closed-ended funds although it also supports approximately 65 hedge funds spanning a range of strategies.
“We have 326 funds and 240 fund manager clients, including a mix of private equity, real estate, debt and infrastructure. What is fairly unique is that we are servicing all the main alternative asset classes. Closed-ended private funds (PE/RE and infrastructure) are in one bucket and open-ended and hedge funds are in the other bucket. We support both with some size and scale.
“Around 85 per cent of Augentius’s business is private equity and 15 per cent is real estate so the acquisition really boosts our size and scale in the private funds side of the business,” explains Partington.
The deal arose thanks to SGG acting as a white label service provider in the Netherlands for Augentius; something it had been doing for the last six years. Discussions among senior executives led to the possibility of making the acquisition and as Partington says: “We started from a position of understanding each other, building a level of trust and reliability, and this will help make the integration process proceed smoothly. We understand each others’ culture.
“We don’t have a UK presence of any meaningful size, or the US. We are pleased to now have access to the biggest funds market globally and the highest growth market globally. It’s only a toehold but it’s good to have a presence in the US.”
Augentius has a US office with around 20 people in New York. There are approximately 1,700 private equity fund managers currently raising a new fund in the US, compared to 150 in China, so that illustrates the size and scale.
“It’s still a small toehold in a huge market,” admits Partington. “Of course we want to grow in the US but we will do so in a way that relies on our expertise. It’s always tricky going into a new market and assuming that you can do things the same way as you do in other markets. We have to be very strategic in our approach.”
Part of the rationale for acquiring Augentius was also for SGG to secure a bigger presence in the UK market and the Channel Islands, especially with Brexit underway.
“European hedge funds have been in a difficult place the last few years. There are some signs over the last 12 months things have picked up a bit but post-crisis it has largely been in the doldrums. So PE/RE has been the main growth area in the European market. The deal also gives us additional services we did not previously have – a UK depositary business and an investor reporting solution Augentius built out over the past couple of years.
“We already have a depositary business in Luxembourg and the Netherlands and we see the UK depositary business as a growth opportunity, particularly for the pan-European managers who have fund structures across Europe. It complements our existing business offering,” says Partington.
Both SGG and Augentius have done a good job of setting up and identifying new business opportunities to capture more revenue from clients. The challenge now for SGG is to go to market with an expanded service offering and deliver it on a more global scale.
“We’ve got the right technology in place, the right people, and the right clients for that matter.. We aim to extend on a more global basis with respect to the LP community.
“There are three metrics for how we measure and define success: retain our staff, maintain quality of client service, and grow client revenues; not by changing fees but by offering them more tools and solutions to add value. It’s about doing a few things really well,” concludes Partington.
Following the completion of the various acquisitions that the firm has recently announced together with Augentius, SGG Group will employ over 2,350 professionals across 24 jurisdictions.