Citi Sells Hedge Fund and Private Equity Business for $425 Million
The transaction is subject to approvals by relevant regulatory authorities and is expected to close in the first quarter of
Avi Mizrahi
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Prime Brokerage
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Institutional FX )
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2015-08-18T19:09:17+00:00
2015-08-18T19:09:17+00:00
Citigroup today announced that it has reached a definitive agreement to sell its Alternative Investor Services business, which comprises Hedge Fund Services and Private Equity Fund Services, to SS&C Technologies Holdings, Inc, for $425 million.
Citi says that this transaction is a positive outcome for the Alternative Investor Services, including its employees and clients. “As a result of this deal, Alternative Investor Services will become part of a known leader in financial services with a demonstrated track record of delivering high-quality products and services to its clients.”
Founded in 1986, SS&C (Nasdaq:SSNC) is a global provider of investment software-enabled services and software focused on the global financial services industry. It is one of the leading American fund administrators for both onshore and offshore hedge funds, fund of funds and private equity funds.
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“This acquisition is solidly in line with SS&C’s strategy of combining organic growth with select, high quality acquisitions. Citi Alternative Investor Services clients can be assured of SS&C’s commitment to continue to serve them with world class people, process and technology. We are excited about adding these talented employees and look forward to the ideas and passion they will bring to our organization,” commented Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies.
The transaction is subject to approvals by relevant regulatory authorities and is expected to close in the first quarter of 2016. The entire operations of this business, including approximately 1,500 employees, will be transferred to SS&C upon closing.
In May 2015, Citigroup sold its $30 billion a month margin FX trading client book, from CitiFX Pro, to two online brokers, FXCM and Saxo Bank.
Their commission only business model on trading seems to be generating all the billions.
Agency model works when one has a client base of tens of thousands, not for smaller or startup operations.
It’s not just the amount of clients, but the volume of business. When you are market making with an agency model, then you need 100s of millions minimum and ideally >1 yards flow trading volume a day.
Just to give you an idea of volumes for Thompson-Reuters: http://fxandmm.thomsonreuters.com/market-tools/market-volumes/
$100 yards a month just in spot fx
Exactly. For new startups, unless you are coming out of an IB with 20 years below your belt, and a massive reputation amongst the institutions, a new FX brokerage setup cannot generate the required revenues to sustain its operations.
From what I have gathered a lot of FX brokers start as bucket shops, and slowly move into a commission only model, depending upon their success with clients and volumes.