Custodian banks that have outsourcing contracts or plan to sign agreements with investment managers include:
-- State Street Corp., Boston, which has agreements with Pacific Investment Management Co., Deutsche Asset Management Inc., Scottish Widows Investment Partnership Ltd. and Swiss Life; and is negotiating on an outsourcing deal with Investec Asset Management Ltd.;
-- Bank of New York, which has outsourcing deals with the London branch of J.P. Morgan Fleming Asset Management; ING Inc. and ABN AMRO Bank N.V. in the Netherlands; and Voyager Asset Management Inc. and AXA Investment Managers Inc. in the United States;
-- Mellon Financial Corp., Pittsburgh, which has deals in the United Kingdom with Prudential PLC and F&C Management Ltd.; and in the United States with TCW Group Inc. and Arrowstreet Capital LP;
-- Investor's Bank & Trust, Boston, which has an outsourcing contract with Barclays Global Investors, San Francisco;
-- J.P. Morgan Investor Services Inc., New York, with outsourcing deals with British managers ISIS Asset Management PLC and Morley Fund Management; and
-- Citigroup Global Transaction Services Inc., New York, with a recently announced deal with the U.K.-based Standard Life Investments.
"Fully bundled middle-operations outsourcing started to ignite in the late 1990s," said Stella Vanguestaine, Bank of New York managing director. "We signed a letter of intent with J.P. Morgan Fleming in late 1999 and converted them to our strategic technology platform in 2001."
BNY's outsourcing deals with ING, Voyager, ABN AMRO and AXA Investment Management were all signed in 2003. Ms. Vanguestaine would not disclose the total amount of outsourcing assets under administration at BNY.
"Money managers are under considerably more pressure these days," said Padel Lattimer, Mellon Financial's first vice president. He said the money managers think it's more important for them to focus on their investment returns and let someone else handle the administration of the assets.
Jay Hooley, executive vice president and head of investor services at State Street, agreed. "There's pressure on costs, increased regulation and reporting and disaster recovery plans. The funds (money managers) are looking more to partners for their administration needs."
State Street is the world's largest outsourcing provider, with $500 billion in assets under administration. It signed outsourcing agreement with Swiss Life earlier this year, and negotiations with Investec involve the firm's U.K. and South African assets.
IBT, with BGI's $470 billion in assets under administration, is the second-largest outsourcing provider. Mark Bjorstrom, managing director of IBT, said it took 18 months to get all of BGI's assets transferred to its technology platform.
Mellon has about $300 billion in outsourced assets under administration, according to Mr. Lattimer. He expects the outsourcing business to increase in 2004 as investment managers focus more "on growing their business as opposed to just surviving which they did during the bear market."