New York, February 13, 2006 - JPMorgan Worldwide Securities Services (WSS), a leading global provider of fund services, today announced it has agreed to acquire the middle and back office operations of Paloma Partners Management Company (Paloma). Paloma is part of a privately-owned investment fund management group, based in Greenwich, CT.
"Paloma's experienced personnel and innovative technical platform are very attractive to JPMorgan. 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," said Liz Nolan, Global Head of Alternative Investment Services for JPMorgan WSS. "We aim to lead the industry in servicing clients with complex alternative investment strategies, and the next step in the growth of our integrated Alternative Investment Services unit is today's acquisition of Paloma's middle and back office operations."
In addition, the parties have agreed to enter into a multi-year contract for JPMorgan to provide daily operational services to Paloma.
"JPMorgan's experience in supporting the hedge fund segment and quality approach to service ensure that Paloma will have the best-in-class operations and infrastructure to support our investment portfolio," said S. Donald Sussman, founder of Paloma and owner of the company that manages the Paloma funds. "Outsourcing these functions to JPMorgan at this time allows us to bring even greater focus to the investment side of our business."
To reflect the expansion of JPMorgan's services in this area, the group will now become known as JPMorgan Hedge Fund Services. This unit will pull together JPMorgan's highly-rated hedge fund administration unit, JPMorgan Tranaut, with the new daily operational capability from Paloma.
Together, the services comprise a complete solution for hedge fund operations and administration. Along with the new Greenwich, CT facility, Hedge Fund Services has offices in Dublin, London, Luxembourg, Bermuda and Boston. 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.
"An increasing number of our hedge fund customers are interested in finding a trusted third party to run their operations for them," said Bhagesh Malde, Global Business Head for Hedge Fund Services. "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 Paloma acquisition also signifies the market launch of JPMorgan's Alternative Investment Services business unit, a suite of products that
- Hedge Fund Services
- Private Equity Fund Services
- Global Derivatives Services
- Leveraged Loan Services
The hedge fund market continues to grow, 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. At that point, according to reports from Tower Group, hedge fund services will be a $2.5 billion industry. It is anticipated that hedge fund managers in optimizing their core investment competencies will increasingly outsource operational functions, relying on service providers' improved, value-added capabilities in middle-office functions.
Given this continued growth, along with new regulatory requirements and increasingly complex investment strategies, the reliability of outsourced investment operations services becomes more important. In this environment, many hedge funds want to hire high quality firms with expertise to handle all of their accounting and operations requirements.
"Because the hedge fund business is relatively new, few providers have the right combination of experience and service quality," said 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."