(Pictured: Martin Smith)
Mainstream BPO, the fund management administration specialist, has both expanded its Asian presence and added to its Australian service offering through the acquisition of a Hong Kong-based middle-office service provider, HFO Hong Kong.
The privately owned firm has had a fully fledged office in Singapore for the past two years but only a representative office in Hong Kong. The new business, being transitioned by September 1, is likely to come with at least five staff and up to eight clients.
Martin Smith, co-founder of Mainstream alongside Byram Johnston, commutes between Sydney and Singapore, and now Hong Kong. He said that two of the HFO clients had already agreed to novate to Mainstream and the others would be offered a three-month trial period for the firm to demonstrate its capability. Payment for the acquisition is based on a multiple of the business which is novated.
Middle-office outsourcing is a high-growth area of outsourcing for custodians as well as administrators, not only with fund managers but also more recently with super funds. Smith said that, often times, the client is looking to have a different middle-office provider to its back-office provider or custodian. Australia’s best example of this is QIC, which has had a long back-office and custody relationship with NAB Asset Servicing and BNY Mellon but appointed Northern Trust for middle-office services.
Middle-office services generally include shadow NAV reporting, trade matching and settlement, portfolio manager reporting, VAR and risk reporting.
“The HFO offering nicely complements what we already do,” Smith said. Mainstream is negotiating on a range of technology applications to go with the deal.
HFO, which is also privately owned, started life as a hedge fund administrator but branched out into traditional fund management. The firm had one client in common with Mainstream, which alerted the Australian company to the possibility of doing a deal.
The HFO office in a prime part of Central, Hong Kong, will be maintained by Mainstream.