Bo Abesamis, senior vice president, master trustee custody and securities lending group, for Callan Associates, San Francisco, said the requirements for straight-through processing are making investment managers look for solutions to handle the back-office work that is needed. Straight-through processing permits the electronic flow of information between a firm's front and back offices and externally to broker/dealers, custodians and central depositories.
BBH calls its service, which it started offering last year, "Infomediary." The firm now has 18 clients for the service, 13 of which came on board this year.
"If clients use us, they don't need the software or the hardware," said Taylor Bodman, a partner in BBH. "All of the (data moving) takes place on our infrastructure. They (money managers) access our system through the Internet," he said.
He pointed out that a money manager with $30 billion under management could have 50 or more custodial banks to which it has to send information. Mr. Bodman said BBH has some clients for the service that have to deal with more than 200 custodial banks. He would not identify the clients.
"We have built a library of maps that we can make available to clients for less than they could build them for a lower cost of operation," said Mr. Bodman. As an example, he said, 11 of the firm's 18 clients have State Street Corp., Boston, as a custodian for some of their pension funds. "Our (one) map for State Street is for 11 clients.," said Mr. Bodman; if the money managers were doing it themselves, each of them would have had to build a separate map to go to State Street, with a high cost-per-unit volume.
Mellon's product, called "Trade Communications Service," was first offered about 18 months ago, according to Vince Sands, executive director, U.S. trust services at Mellon. The system is also Internet-based and is part of a "suite of back-office products" offered to money managers, according to Mr. Sands. Managers can pick and choose among the services. Mellon has 27 overall outsourcing clients and two clients who just use the Trade Communications Service. No clients were identified.
Northern Trust's "Trade Order Management System" is offered within the bank's Global Investor Passport system, according to Ann Zeiler, vice president in charge of business development.
Northern has been formally offering the service for about two years and now has seven clients, according to Ms. Zeiler. She said the product "has become a very hot topic because money managers feel increasingly under pressure on their revenues." She would not identify the clients.
Most of Northern's business for this product comes from overseas. "Our focus is on cross-border managers," said Ms. Zeiler. "We're strongest in supporting cross-border trading activities, which has more to do with the strategies the manager is undertaking."