interview

Apex Group was founded in 2003 to fill a gap in the market for a more tailored and ‘full service’ fund administration service. CEO and Founder Peter Hughes explains how the business has expanded – in terms of service offering and geographical reach – in the years since, and how it plans to meet the needs of a speedily evolving sector

Words:

Jon Watkins

Tell us about your early life and your journey into the financial sector…

I was born in Dublin and spent the first 10 years of my life in Ireland, before moving to the UK and going on to study economics at Bristol University. I spent a while working on a farm, which taught me that it is essential to have the respect of your team – and the value, as a leader, of leading by example and quite literally rolling up your sleeves.

I’ve always been ambitious and I felt finance seemed as good a sector as any to prove myself and begin my career.

Where did those early years take you and how did your initial career affect your decision to launch Apex Group?

I trained as an accountant in a mid-sized firm, which gave me a lot of access to every aspect of how businesses worked and a good grounding in the fundamentals.

In the mid-1990s, I moved to Bermuda with KPMG, before joining a fund administration firm called Hemisphere Management.

I then joined one of my independent asset management clients as CFO. But I became frustrated by the quality of service and responsiveness we received from our service provider – and so I decided to do something about it by developing an organisation that truly puts the client first.

You launched Apex Group in 2003 – what had you seen in terms of a gap in the market and what was the proposition when you launched?

My vision was to develop a business that was valued by every single client, delivering a flexible and personal local service on a global scale. In the early days, we concentrated on delivering a consistent, responsive, personal and reliable service to our clients, regardless of their size or stage of their lifecycle – something we are passionate about retaining no matter how big we become.

So today, those foundations remain at the core of our mission – which is to strive every day to push boundaries so we can be a better business and inspire others.

That’s about listening to our clients so we can evolve our offering, putting people and experience at the heart of the journey. We share our business success by rewarding high performers who work with energy and agility. Staying true to these founding principles means we have been able to scale and develop into a valuable service partner, able to help clients navigate increasingly complex global regulatory landscapes and intensified investor scrutiny.

And, on the journey, we have gained the backing of some of the world’s most respected investors, which has enabled us to scale into an institutional-sized business that can deliver the broadest range of solutions across the full value chain for our clients – something we call our singlesource solution.

When you’re starting a business, you’re focused on the immediate future and building a reputation. We did this by being fully committed to doing the best for our clients – many of whom remain our clients to this day. The rapid growth came later, as our business and product set became more sophisticated. Our M&A strategy enabled us to scale with velocity by adding products and geographies to our capabilities, with a goal of being able to deliver any service a client might need, no matter where they are in the world.

The business has scaled hugely since its launch. Can you walk us through that growth and the expansion into wider delivery of products and services to the wider FS sector?

In 2008, the global financial crisis struck, and we took the decision to diversify both geographically and in the types of clients we serviced. That was a big strategic decision for us.

In the past five years, the group has grown both organically and through more than 30 strategic acquisitions – including the recent addition of Sanne Group – taking us from $50bn to nearly $3trn in assets across administration, custody, depositary and under management.

We now operate from over 80 offices in more than 40 markets worldwide, with over 10,000 employees.

Along the way, we have continually improved and evolved our capabilities to ensure we can continue to offer a singlesource solution.

Starting out as a pure fund administrator, we built out our offering based on listening to our clients and their needs. That led to us developing and acquiring an unrivalled range of additional solutions, including a proprietary digital bank built specifically for the asset management space, depositary, custody, super-manco services, corporate and business services, compliance solutions and a pioneering ESG Ratings and Advisory solution.

The recent addition of Sanne marks an inflection point in our story, as we welcomed 2,500 new colleagues, added six new locations and expanded our presence in strategic jurisdictions such as the Channel Islands.

Bringing Sanne into the group expands our premium book of clients and adds further weight to our experienced team.

What separates you from your competitors, and can you explain exactly how the single-source solution supports that differentiation?

It’s at the heart of how we approach everything we do at Apex Group – providing clients with all the services they might need, through one single relationship. ▼

The interview

Peter Hughes

We have increasingly found that our clients appreciate the convenience, reassurance and efficiency of being able to access all the services they need through a single relationship.

We are clearly very proud of what we have developed – but more importantly our clients are reaping the benefits.

Forrester Consulting published an independent study earlier this year on the Total Economic Impact of Apex Group and found that clients leveraging multiple services from us – using our single-source solution – achieved a return on investment of 105% and cost benefits of $5.39m, with a net present value of $2.75m over a threeyear period.

Despite the exponential growth of the business, which has led to us becoming one of the largest independent service providers in our space, we will never become complacent or lose sight of why we have built it. We want to be the firstchoice provider for any client in our space, not because of our size, but because of the quality of service and the experience with our brand.

The business has been on a big acquisitions drive. What’s the strategy?

As I’ve mentioned, our growth strategy is underpinned by a simple concept: to provide our clients with an exceptional experience that makes their lives easier. So every acquisition we make is done to add value to our business, whether that be through additional geographies, products or expertise. The acquisitions don’t just add scale to our business, they add the technologies, capabilities, people and the footprint we need to be the best possible service partner we can.

What are the keys to success when it comes to acquisition – especially in markets where there is pretty much a race to consolidation – and how have you ensured success in your acquisitions?

The key is to remain disciplined in your approach to acquisitions – as we have done – including proactively seeking out wellrun businesses and avoiding overheated competitive processes. We have built a flexible but robust model for integrating acquisitions, and dedicated teams to run those integrations smoothly so we do not impact BAU or our clients’ experience.

As a result, I am very proud that we have never lost a client as a result of an integration decision, and we have a more than 99% client retention rate globally.

What’s the growth trajectory for the business and what form will that take? Building on this excellent foundation

our acquisitions don’t just add scale to our business, they add the technologies, capabilities, people and the footprint we need

with our supportive investors Genstar, TA Associates, Carlyle and Mubadala, and the right leadership team in place, we see no ceiling to what the business can achieve.

We are proud to be disrupting the industry, both in the way we deliver service and in driving positive change in the areas that matter most to us.

Now that we have reached this scale – we want to use our global platform for good. Not only have we developed a unique market-leading ESG Ratings and Advisory business to support our clients in achieving their ESG goals, we also walk the walk. We have purpose beyond being a financial services provider, and that is to drive positive change for our people, our clients, the industry and future generations.

We are particularly committed to driving change across three key themes: women’s empowerment; the environment; and education and social mobility.

We have some really great initiatives that demonstrate our commitment around these areas, such as our Women’s Accelerator Program, our global mobility program for employees, and the fact we were the first in our industry to offset our entire lifetime of carbon emissions this year.

We are very aware of our responsibility as a global firm to ensure that capital flows to the right places, and that we must leave a good legacy that our children, and our children’s children, can be proud of. We see ourselves as far more than just a financial services provider.

How do you keep the business at the front and ensure you are constantly meeting clients’ evolving needs?

We must not become complacent, and we must remain committed to investing in our services, technology and people so that we become even more agile in our response to evolving client needs.

We maintain a flat-structured business with an open-door policy – so any client or employee is welcome to contact me directly at any time. That shows our level of commitment to listening to our clients and our people, and our willingness to continually evolve and improve.

What do you see as the big challenges in the funds sector moving forward?

There are a number of things in play right now. The past year has seen a maturation of a number of trends in the asset management and private markets. Downward pressure on costs and fees, as well as a global talent shortage, continue to drive outsourcing and ESG has transitioned from buzzword to ‘nice to have’ and now fully into the mainstream.

Private market assets continue to evolve and become more accessible, with greater transparency and better access to information for investors.

And, in a complex and uncertain economic and geopolitical environment, now more than ever clients are looking for partners that can help them to simplify their operations, control costs, reduce risk and help them to achieve their growth objectives. We certainly feel that asset managers are increasingly appreciating the convenience, reassurance and efficiency of being able to access all the services they need through one single relationship.

The market is seeing the benefits of this approach and, as such, we expect the competitive landscape to continue to consolidate in 2022 as providers seek to achieve greater scale and depth of product offering.

What trends are we seeing in the sector as a result of current macroeconomic issues?

It’s clear that the volatile equity markets, rising interest rates, geopolitical instability and the ongoing disruptions from the global pandemic have resulted in allocators turning to credit strategies to achieve their targets. In addition, at the start of 2022, the private equity industry was sitting on a significant amount of dry powder that needed to be deployed, and we have seen strong leveraged buyout activity, driving demand for capital markets and escrow solutions.

We expect existing players to continue allocating larger proportions of assets under management to private credit, alongside the diversification of established managers into new strategies.

Service providers must be equipped to support increasingly complex and

granular private debt portfolios with more sophisticated and demanding service requirements.

There also continues to be strong momentum for managers to evaluate the effects of investing in the environmental and social context, particularly when it comes to climate change.

However, it is surprising that there are still managers who have not yet considered what long-term effects particular investments will have. We see that there is still much to do in this space and an opportunity exists for service providers like us to help close that gap.

Were there significant sector changes during the pandemic that you believe will have a lasting impact on the way the sector operates?

The ability – and desire – of clients to work flexibly and remotely has certainly continued, even as Covid-19 restrictions have lifted, so quality digital and technological solutions are essential.

For service providers, continued investment in quality technology platforms and solutions is crucial. However, I strongly believe that investment in technology must be paired with investment in people. The talent market remains as competitive as ever and we remain excited to find, train and retain the best talents, combining their local expertise with our global reach and resources.

The pandemic has also refocused priorities for many of us, including a renewed focus on risks of all types – not just financial – and exposed much of the inequity in our economies and societies.

That’s partly why we are so proud of our ESG Ratings and Advisory offering, designed specifically for the private markets and their investors. Now, more than 350 general partners in more than 45 countries are using our ESG services to report on their investments in line with ESG standards and regulations.

ESG is a personal priority for me, and I see huge opportunity to support the flow of capital into businesses and assets that benefit people and the planet, now and for my children’s generation.

As I said before, it’s important to walk the walk – so in addition to helping our clients improve their impact on the world around them, we are also looking inwardly. In addition to offsetting our lifetime of carbon emissions, each year we plant more than 200,000 trees – 10 trees for every client contact signed and a tree for every five years of employee service.

We’re not finished there, though; we are also working to become ‘net positive’. Focusing on the people element, we are committed to diversity of thought and are always looking to improve our business and to create an inclusive environment.

We are also aware that the financial services industry is not as diverse as it should be, and we are addressing these disparities across our own business through the launch of key initiatives for minority groups – including the Women’s Accelerator Program.

How well positioned are the Channel Islands to meet the demands of the evolving funds sector?

The Channel Islands’ funds industries continue to go from strength to strength, seeing double-digit growth, now with combined fund assets serviced standing at more than $1trn.

Over the years, some of the world’s top managers, pensions funds, insurers and sovereign wealth funds have structured their funds in Guernsey and Jersey.

The fact that Guernsey and Jersey are not in the EU is not seen as prohibitive to managers structuring here

FACT FILE

Name: Peter Hughes Role: CEO and Founder, Apex Group Lives: Hamilton, Bermuda Eductaed: University of Bristol Interests: I try to make the most of my time away from screens by getting outside – conserving biodiversity and the natural environment has been a lifelong passion of mine and it is why ESG is at the heart of our purpose as a business.

This deep collective knowledge of lawyers, administrators, accountants and the local regulator makes the Channel Islands a very compelling proposition – and will continue to do so.

Do you think long-talked-about threats such as international tax really threaten the islands’ standing – or are there other benefits they offer? And are there other appeals, such as stability and a strong regulatory environment, that are proving a big draw right now?

Jersey and Guernsey continue to play an important role on the global financial services stage, with an embedded ability to adapt quickly as jurisdictions.

The lines of communication between the industry, the government and the regulators are very strong, which allows the jurisdictions to adapt while retaining a flexible and robust regulatory framework.

Among our clients, Guernsey is seen as a jurisdiction that is responsive to change and keen to embrace innovation.

This was demonstrated through the extension of the popular PIF regime in 2021, which offers increased flexibility and speed to licensing for promoters and family office groups.

The Jersey Private Fund regime also remains very popular because of its flexibility and speed to market. Fund managers and investors want a regime that is robust and flexible, and that is what Jersey offers.

The fact that Guernsey and Jersey are not in the EU is not seen as prohibitive to managers structuring here. The easy and cost-effective marketing offering through the National Private Placement Regime provides an attractive alternative to the AIFMD passport regime.

The Channel Islands continue to attract interest from global funds and businesses – and we are better placed than ever to meet their needs. n

Recent developments in global private capital the Channel Islands perspective

By Ben Robins, Partner and Global Practice Leader for Mourant’s global funds practice, and Geoff Cook, Chair at Mourant Consulting

THIS YEAR HAS already presented its fair share of challenges for investors, but an area that continues to boom, for a number of reasons, is private capital.

This is the broad term used for investments in assets not available on public markets, often structured through investment funds. Preqin, the leading provider of data on alternative assets, defines private capital as private investments in private equity (PE), venture capital (VC), real estate, infrastructure, private debt or natural resources.

Preqin estimates that assets under management (AUM) in the alternatives market will hit $23tn by 2026, a sharp rise from the $13.3tn recorded at the end of 2021.1

WHY HAS PRIVATE CAPITAL GROWN?

Public markets have endured pronounced volatility over the past couple of years especially, whereas private markets have been less susceptible to external forces.

Access to private capital, formerly an institutional preserve, is being democratised. As individual and family wealth levels have increased, they are looking to corporate-style structures for their investments, noting the attraction of often superior returns achieved in the private markets.

PRIVATE CAPITAL, ECONOMIC RECOVERY

Of course, even private capital had to face up to the challenge posed by the pandemic, but the response was both resilient and resounding.

Strained public finances and escalating national debt, now at record levels, will have far-reaching consequences.

This backdrop will see increased demand for private capital, which will play a key role in economic recovery, as well as proving crucial to the new public-private partnerships that we anticipate will emerge in the coming months and years.

A striking example is the development of Covid-19 vaccines. Governments have extensive responsibilities for health legislation and services, but not for the production of medicines and vaccines, which lie in the pharma sector, given the vast capital costs involved in developing vaccines and the risks of failure.

Before the pandemic, vaccines could take decades to produce. Still, due to the innovation of companies such as PfizerBioNTech, they have developed much faster and rapidly deployed around the world in partnership with governments.

In 2022 and beyond, we can expect to see more examples of private capital put to work in a very new environment, where shortfalls in recovery funding encourage new public-private partnerships.

Significant new funds are now being formed, for example, to tap private capital investment into renewable energy projects and help fund the important COP26 transition to more sustainable energy sources.

HIGH INVESTOR CONFIDENCE

This isn’t to say that there aren’t headwinds that could hinder private capital’s seemingly endless growth. The return of inflation, less accommodative central bank policy, rising interest rates, the prospect of market corrections and increased geopolitical tensions could all impact the market.

Inflation especially was grabbing the headlines at the time of writing. Only time will tell, but fundamentals point to a significant reversal of the disinflationary and demographic forces that have suppressed prices and labour costs for three decades.

Inflation may peak and fall back, causing the pandemic-driven issues to abate, but the structural change in labour supply will mean that inflation will not return to the super-low levels of the past 30 years.

Inflation tends to drive an unlevel playing field. If you are retired and living on your savings, high inflation reduces the actual value of your income – every pound, dollar or euro doesn’t go as far, as everything costs more.

If you are poor, the surge in energy and food prices will immediately and disproportionately impact your cost of living. However, if you have borrowed substantial sums at fixed rates, you may not be too concerned as you see the value of your assets climb while your borrowing costs remain fixed.

Overall, high inflation puts the postpandemic recovery at risk, with the spectre of a recession looming.

The challenge of high inflation for the business world is making business and investment decisions less predictable.

As far as international finance centres and cross-border investment are concerned, there is the potential for a slowing of transactions while investors appraise the new environment and the impact on expected returns.

However, economic strains can also create asset management opportunity – for example, the need for enhanced debt and credit fund finance and distressed asset investment opportunities.

Often the best private equity returns are experienced by funds established and acquiring assets in a downturn.

There are forces that we expect will counteract the impacts of rising inflation. Institutional investors have substantial equity, and the impetus for putting that to work is even more significant in an inflationary environment.

Investors will want to ensure the value of their capital isn’t eaten away by inflationary forces and will be even more motivated to invest.

The environment is not an easy one for investors to navigate, but it does seem as though confidence remains high despite the inflationary pressures. Institutional trends especially are positive.

The giant ($495.3bn) California Public Employees’ Retirement System (CalPERS), for example, has set new asset allocation targets to take effect in July 2022, with no less than 21% of funds allocated to real assets and private equity – an increase of $59bn.

Traditional asset managers are also joining the party, with groups as diverse as Blackrock, JP Morgan and Schroders increasingly active participants in private capital, further embedding the trend to invest in alternative assets.

CHANNEL ISLANDS’ ROLE

The race to harness private capital is on, and the Channel Islands have an important role to play. The jurisdictions as a whole, and their leading firms, are already repositioning for the new environment.

ESG is high on the agenda to assuage investor concern, investment in the best talent is increasing, and efforts to meet ever higher governance and international regulatory standards have wide support.

Those continuing efforts will help the islands build on successful histories in this area. In the Channel Islands in 2021, fundraising and deal activity were buoyant in the PE and VC spheres, across a wide variety of asset types, but with technology, sustainable investment and renewables proving popular themes.

Real estate deal activity (mainly in UK offices, retail and logistics) also rose sharply last year, as have transactions funded by our distressed debt and credit opportunities fund clients. We see these trends continuing through 2022 and beyond.

Jersey and Guernsey are ideally placed to facilitate access to private capital, and at Mourant we have seen no let-up in 2021’s flow of instructions in the first half of this year.

This has not been the year that any of us expected, but once again the islands’ agility and expertise are the constants that can be relied on. n

Significant new funds are being formed to tap private capital investment into renewable energy projects

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Mourant is a law firm-led, professional services business with more than 60 years’ experience in the financial services sector.