Focus On: Operations
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TOP OPS EXEC: Hans Hufschmid, GlobeOp Financial Services
May 4, 2011
NAME: Hans Hufschmid
COMPANY: GlobeOp Financial Services
KEY FOCUS: Dealing with new due diligence demands on hedge fund customers.
For Hans Hufschmid, the chief executive officer of GlobeOp Financial Services, the past year has been a time of positive developments.
When the returns are tabulated for 2010, “we will finish the year at record revenue levels and assets, achieved key cli- ent wins and have a very healthy balance sheet, with no debt,” Hufschmid said.
Indeed, the 11-year-old, London- listed provider of middle and back-office services, specialized technology and inte- grated risk reporting to hedge funds and asset management firms, saw its assets under administration (AuA) increase 37 percent in 2010 to $149 billion; reported a 21 percent increase in revenues and a 52% adjusted operating profit for the year;
and won new, marquee clients in 2010 such as Morgan Stanley, General Motors, and European Credit Management Ltd., a Wells Fargo company.
Additionally, as of December 31, 2010, GlobeOp – which employs 1,800 people in ten offices on three continents – reported a cash reserve in the order of $73 million versus $42.6 million in the prior year, allowing the firm to consider acquisitions of other fund administrators and relevant technology providers.
Hufschmid attributes the firm’s recent growth – in part – to the upswing in the fortunes of his primary clients – hedge funds. After a tough 2009, these funds came back strongly in 2010. The Morningstar 1000 Hedge Fund Index, for example, reported an increase of 10.4% for the year, leading its alternative investment strategist Nadia Papagiannis to describe the sector as having “fully recovered from 2008’s hangover.”
But the London-listed firm’s contin- ued expansion – the firm added 29 new clients in 2010 and increased its total of funds served to 1500 – can be attributed to other factors as well. These include Hufschmid’s and the firm’s ability to main- tain high standards, diversify service and product offerings, anticipate the reporting, regulatory and technology needs of clients and deftly deal with the due diligence demands of hedge fund investors.
Hufschmid is the former head of foreign exchange at Salomon Brothers, where he ran currency trading for nine years. Then, he joined Long-Term Capital Management, a massive $102 billion hedge fund that failed but nonetheless, was praised for its state-of-the-art, administra- tive technology, overseen by Hufshmid. Then, he launched launching GlobeOp.
In the realm of recent client gains, Hufschmid proudly points to the firm’s ability to win large institutional clients in 2010 such as General Motors and Morgan
Stanley. GlobeOp helps the US carmaker handle daily collateral management, valuations and reconciliation including foreign exchange, commodity and interest rate derivatives. For the global bank, it provides independent middle and back office services and detailed daily data and reporting for its managed account plat- form ALPHA.
Perhaps the most notable devel- opment of last year, however, was the takeover of the investment management operations and staff of Wells Fargo’s subsidiary European Credit Management Limited, which oversees the management of about $15 billion in assets. GlobeOp implemented a landmark liftout of the in-house support infrastructure including approximately 50 employees.
According to Hufschmid, the ECM review was “a very extensive process” con- ducted by a Big Four audit firm, involving comparisons with 10 other institutions over a six-month period. “They looked under every rock, tested each and every process, spent time with management and traveled to our India operations more than once,” he said.
On the standards front in 2010, in anticipation of new global standards for service organizations, GlobeOp became one of the first administrators to success- fully adopt the International Standard on Assurance Engagements (ISAE) 3402 and the Statement on Standards for Attesta- tion Engagements (SSAE) No. 16. The new standards officially replace the Statement on Auditing Standards No. 70 (SAS 70) Type II certification in 2011. The independent examination of GlobeOp’s middle, back office and fund administra- tion controls and transaction solutions involved an audit firm examination of all 10 GlobeOp offices on three continents.
GlobeOp also handled a 30% increase in investor due diligence visits and inquiries into its valuation processes.