Limestone operates in the Fund Services Provider (FSP) market. Through a ManCo, it offers a range of key financial products, third-party and hosted fund solutions and IT-driven services for asset management companies. Limestone’s CUBE technology is advanced and is scalable; it also runs a low-cost back-office and service centre. From its Estonian base, Limestone is increasingly focussing on Luxembourg, where financial services are booming. FSP opportunities have also been boosted by increased regulation, cyber security concerns, MiFIDII requirements and by the deep uncertainties still surrounding Brexit: one-third of hedge funds’ capital is raised from mainland EU investors.
- Strategy: Limestone seeks to exploit the opportunities in the EU market for out-sourced FSP services. Its priority is to grow its customer base, especially in Luxembourg – a location that is increasingly popular for asset management undertakings, including hedge funds. Deploying its sophisticated CUBE technology – a key intangible asset – and scaling up its back-office services will be key in expanding its client base.
- Management: Limestone has a dynamic and experienced management team, with Executive Chairman, Markku Malkamaki, being pivotal – he has a 30-year record in the financial services sector. Antonio Thomas, the Managing Director in Luxembourg, will also play a crucial role, along with Miika Peura in Estonia and Paavo Pold, a compliance specialist: strong Supervisory and Advisory Boards are in place.
- Growth opportunities: Given the expertise of its management in the asset management space, Limestone is set to embrace the many opportunities that are arising, especially within Europe where c5,000 asset management companies are registered. Undoubtedly, the sector is undergoing major change – Limestone is well-placed to derive tangible benefits from this trend which is driving the out-sourcing market; moreover, its range of services is competitively priced.
- Consolidation: As it seeks to develop its business, Limestone is keen to participate in the consolidation of the FSP sector. This process is already underway as regulation becomes more complex and expensive to undertake. Hence, more out-sourcing by asset management companies, seeking economies of scale, seems inevitable. CUBE’s portfolio and client reporting capabilities will be sought after as further out-sourcing is undertaken.
- Challenges: Amongst the material risks faced by Limestone, we have identified some market-related risks and some which are specific to Limestone. In the former category, a reversal of the buoyant out-sourcing market, the entry of well-capitalised, technically proficient, IT vendors and data protection issues are obvious risks. For Limestone itself, a lack of new clients at decent margins, the ability to scale upwards, the departure of key personnel and the lack of finance to underpin its expansion plans.
- Financial Commentary: By 2023, Limestone expects to have grown its revenues to over €6m, compared with just over €0.4m for 2018 and an estimated €1.2m for the current year. At December 2018, Limestone’s net assets were €0.8m and there was no net debt on its balance sheet. It has plans, though, to raise funds of €1.5m to €2.5m shortly: €0.42m was raised from existing shareholders in December 2018. Thereafter, depending upon its level of growth, it is expected to seek to raise a further €3m to €5m, part of which will finance planned consolidation transactions.