Navigating the 2008 Financial Crisis (Part 2 of a 4 Part Series)

By Ron Tannenbaum

ron-tannenbaum2-ebriefing

How did GlobeOp successfully navigate the 2008 financial crisis? Ron Tannenbaum, SS&C managing director of business development for Europe, Middle East, and Africa, explains in the second of his four part series on the evolution of hedge fund administration.

How did GlobeOp navigate the financial crisis?

As hedge fund assets grew, so did GlobeOp as a business. 2007 marked a high-point for hedge funds. As the crisis unfolded, the hedge fund industry underwent enormous structural change. Initial outflows following the 2008 credit crunch resulted in global hedge fund industry AuM declining to just $1.4 trillion. GlobeOp was at the forefront of the industry. It faced increased workloads and cemented its reputation as an organization that manages frenetic scenarios with calm and composure.

A lot of money left the hedge fund industry in 2008. However, GlobeOp was not hurt as badly as most competitors, mainly due to our focus on OTC instruments and fixed income. The relative value and macro fund investors were not as adversely affected as equities. There were fewer redemptions in those asset classes due to their low correlation to the equity markets and comparatively low volatility. In 2009, inflows into hedge funds returned at a rapid rate. At one stage, the industry pushed past a record $3 trillion as investors moved away from traditional stocks and bonds that displayed high degrees of market correlation.

What are the biggest investor trends you have seen in the hedge fund industry post-crisis?

Start-up hedge funds in the pre-crisis era routinely highlighted that their business operations had minimal infrastructure. The crisis changed this, as investors’ operational due diligence ramped up, forcing structural and operational improvements at hedge funds. A hedge fund today will typically be asked about its operational processes and technology in immense detail. Hedge funds are expected to have well documented, robust business continuity plans and cybersecurity measures in check.

Pre-crisis, the hedge fund industry was dominated by private investors. This changed and the industry became more institutional as pension schemes upped their allocations hoping to accrue returns to plug sizeable deficits.I Insurers too moved towards hedge funds amid the low interest rate environment. The post-crisis environment saw major changes for GlobeOp. In 2012, it was acquired by SS&C Technologies. The combined business, through its various synergies, now services a more diverse range of institutional clients and asset management products.

To learn more about how regulation impacts the hedge fund industry, come back next Wednesday to read The New Era of Regulation, the third installment in the evolution of hedge fund administration series.

Catch up on our evolution of hedge fund administration series:

Part 1 – SS&C GlobeOp Financial Services: The Early Days

 

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