Chicago-based Northern Trust Corp. has agreed to buy hedge fund manager Citadel LLC’s fund administration business, Omnium LLC, a person familiar with the situation said Thursday. The value of the deal was not known.
Both Northern Trust and Citadel declined to comment.
The acquisition is part of the consolidation of the fund administration industry, as hedge funds increasingly turn to institutional investors for capital. Pension funds and endowments often demand that funds partner with large, well-established service providers, as they are more aware of operational risks in the aftermath of the financial crisis.
Omnium, which provides technology-driven administration to funds with assets over $500 million, has about $70 billion in assets under administration, according to its Website. It is the largest among several fund administrators on the block for sale, one industry participant said.
Omnium has had much difficulty with its relatively expensive monthly fee and high fund size threshold, another industry participant said. An acquisition by Northern Trust would also give Omnium access to a bigger distribution platform, he said.
Northern Trust, on the other hand, has gained much traction in the fund administration over the past two to three years, earning a reputation among fund clients for being able to handle complex strategies and trading instruments, the first industry participant said.
As of Dec. 31, 2010, Northern Trust’s hedge fund and fund of hedge funds servicing business had assets under administration of approximately $97 billion.
–Jenny Strasburg contributed to this story.
