Bangalore: London-based hedge fund administrator Fulcrum Group, backed by private equity firm 3i Group, and New York-based Butterfield Fund Services recently agreed to merge, creating an entity with close to $100 billion (Rs4.37 trillion) in assets under administration. The new organization, Butterfield Fulcrum Group (BFG), would be headed by Fulcrum chief executive Akshaya Bhargava.
Scaling up: Akshaya Bhargava will lead Butterfield Fulcrum. Photograph: Jagadeesh N. V. / Mint
The new company, which will be based in Bermuda, plans to offshore a part of its work to India — Fulcrum already has an India operation. In an interview with Mint, Bhargava discusses BFG’s plans. Edited excerpts:
How will the merger make things different for Fulcrum?
Fulcrum has always been a very boutique company with great technology. Also, it has a strong reputation for handling very complex asset classes. What we lacked was scale to push up our business. Over the last two years, scale has become very important in the asset management industry. Today, its not individual money but institutional money that is coming to the hedge funds and it is going to big funds. In this situation, scale is important.
What is the India picture?
India’s play is three fold. We get a larger quantity of qualified people (in India) than anywhere else. Also the time zone factor. We will follow a global model. If you are a US fund, your fund manager will be in the US, but your production centre will be in India. India is a centre of gravity for me. The third factor is cost, but it is not that important.
What will this mean for India?
Currently we have about 40-45 employees in Bangalore. In the next three to five years, 50% of our global headcount will be in India. We will save 2x (two times) through this as wage difference. Even if India were 30-40% more expensive (than now), it would be good for us. Our mandate for the next 12 months includes scaling up. We will expand beyond Bangalore. Chennai is a potential destination due to its accounting talent. We need real deep technical skills.
Do you foresee global hedge funds moving to India?
I do not see hedge funds being based out of India in a hurry. In a rising economy, mutual funds do well. In a falling condition a good mutual fund gives you lesser negative returns. In India, the equity market is already delivering 9-10%. So why do you need hedge funds? Also leverage is not available in India to a great extent. Hedge funds will not be based here but if they do, we would like to service them.
Do you advise 3i on BPO (business process outsourcing) investments?
Fulcrum has itself grown into a very big entity (and I devote my time to it). However, I do advice them (3i) on outsourcing firms. I feel only two types of BPOs will survive in India — those who have a huge scale and those who are niche with intense specialization.