Fulcrum Group and Butterfield Fund Services yesterday announced they plan to join forces to create a Bermuda-based company expected to be in the top 10 alternative asset fund administration companies in the world.

The agreement to form Butterfield Fulcrum Group (BFG), announced yesterday, will create a company with close to $100 billion in assets under administration and around 400 employees in nine countries.

Their clients include nearly 1,000 hedge funds, fund of funds, private equity and institutional investment management clients.

Butterfield Fund Services employs around 100 Bermuda-based staff, who were told of the merger yesterday morning, while Fulcrum has eight employees on the Island.

No job losses are anticipated and the heads of the merging entities told The Royal Gazette yesterday that the merger was driven by growth, rather than cost-cutting, objectives. In a joint interview, Butterfield chief executive officer Alan Thompson and Fulcrum Group CEO Akshaya Bhargava said the agreement was aimed at creating "the best fund administration company in the world".

"In any merger, both parties have to bring different strengths," said Mr. Bhargava, who will become BFG's CEO. "Butterfield brings size and scale and deep client relationships. Fulcrum brings technology and a range of new products and services. The combination is strong."

Mr. Thompson said Butterfield would also gain geographically. "Fulcrum is in a couple of locations where we want to go in — New York and Dublin," Mr. Thompson said.

"We will have ten locations in nine countries. That's pretty global coverage. $100 billion in assets under management is up there in the league tables. We believe we'll be in the top ten globally."

Jill Considine, chairman of the Fulcrum Group, will be the chairman of the BFG board. Mr. Thompson and Graham Brooks, executive vice-president, international at Butterfield will also join the BFG board, along with other representatives from Fulcrum and 3i, a private equity firm backer of Fulcrum.

While the struggling world financial markets of late have made for a difficult investment environment, Mr. Thompson felt that now was a good time to launch BFG.

"If we were setting up when the market was booming, we could be missing opportunities," he said. "As the market starts to come back, we'll be ready."

Both men agreed there was huge potential for growth in the hedge fund industry in the coming years and, in particular for fund administrators like BFG.

"Hedge funds used to have a certain mystique as people thought they were just for multi-millionaires, but they are becoming an accepted investment vehicle these days," Mr. Thompson said. "Now they make up five to ten percent of people's portfolios. They can double in size and still be just a small percentage of investments.

"There is a trend to take fund administration to a third party. The current crisis is going to accelerate that, because people want objectivity in pricing and they can get that from administrators."

Mr. Bhargava said that if just four percent of pension investments moved into hedge funds, that would double the size of the hedge fund industry, which left much room for growth. Large institutional investors will demand transparency and BFG had to be fully prepared to meet that requirement, he added.

"Our industry is growing at 15 to 16 percent a year and if we don't achieve that we would not be getting our share," Mr. Bhargava said. "We would hope to be growing in excess of that."

Mr. Thompson added: "We believe we'll have one of the best platforms out there and there is no reason we shouldn't get more than our share and that is our objective."

BFG will have offices in Bermuda, the Bahamas, the Cayman Islands, the US, the UK, Ireland, India, Guernsey and two offices in Canada.

The merger is subject to governmental and regulatory approval. Merrill Lynch acted as a third-party adviser to Fulcrum Group on the agreement, while UBS Investment Bank advised Butterfield.