JPMorgan Worldwide Securities Services (WSS) is to acquire the middle and back office operations of Paloma Partners Management Company as part of a strategic programme to build a complete suite of outsourced services for hedge fund operations and administration.
Paloma is part of a privately-owned investment fund management group, based in Greenwich, Connecticut. As part of the deal, the companies have entered into a multi-year contract for JP Morgan to provide daily operational services to Paloma.
Liz Nolan, global head of alternative investment services for JPMorgan WSS says: "This acquisition allows us to immediately offer our hedge fund clients a high quality option - built on top of a hedge fund-specific platform - for outsourcing their daily operations."
The US investment bank has packaged together its new acquisition with its own hedge fund admin business JP Morgan Tranaut, to create a new dedicated business division dubbed JP Morgan Hedge Fund Services. Along with the acquired Greenwich facility, Hedge Fund Services has offices in Dublin, London, Luxembourg, Bermuda and Boston.
Bhagesh Malde, global business head for Hedge Fund Services, says the new daily operational service has the capability to interface with over 15 prime brokers and provide daily valuation for trading groups in the Americas, Europe and Asia.
He adds: "Not only can this service lower the cost of operations for hedge funds, but it frees managers from operational issues so they can focus on what they do best - making trading decisions."
The hedge fund market continues to expand, with annual growth forecasts ranging from 10-20% for the next three to five years, and with hedge fund assets expected to double from $1 trillion currently to $2 trillion by 2008 or 2009. As the market grows, it is anticipated that hedge fund managers will increasingly outsource operational functions in order to focus more acutely on their investment strategies.
"Because the hedge fund business is relatively new, few providers have the right combination of experience and service quality," says Malde. "The combination of Paloma's technology and operations platform and JPMorgan's existing franchise brings together the experience in back office servicing, proven processes and technology, and global resources needed to manage all the requirements of these complex outsourcing relationships."