Outsourcing will also be an important revenue generator for asset servicers in 2004, according to Mr. Lynch. "Outsourcing is happening everywhere," he said.
"There will be more outsourcing, especially on the compliance side," said Mr. Kohlberg, pointing to the recent mutual fund scandals involving several prominent money managers.
Rob Mancuso, senior vice president of Investors Bank & Trust, Boston, thinks outsourcing will pick up "as the scandals get resolved. When you're in the middle of a crisis, you don't make long-term strategic decisions."
He pointed out that the increased regulatory oversight resulting from the scandals will cause more money management firms to outsource "especially in the compliance and risk management area. We can help by providing more automated compliance and risk management reports."
"There will be continued outsourcing as money managers want to outsource part or all of their back-office activities," said Jean Sheridan, executive vice president and deputy business unit head for the corporate and institutional services division of Northern Trust Co., Chicago.
"You will see increasing numbers of firms outsourcing more of their accounting, administration and middle-office work," said State Street's Mr. Hooley. "The increasing requirements of regulators and a desire to contain costs will cause more outsourcing."
More multinational cross-border services will also be required of asset servicers, according to Ms. Sheridan. Large multinational companies with separate pension plans in different countries will be looking to consolidate the custody of those plans.
"The ability to have more oversight of subsidiary plans and the need for more information and ease of administration will cause more multinational companies to search for a single provider," said Ms. Sheridan.
She said the "pooling" concept for multinational companies, whether they are based in the U.S. or abroad, will be an important trend in 2004.
"We continue to add relationships with multinational corporations," said James Palermo, vice chairman of Mellon Financial Corp., Boston. "If we are the custodian for their U.S. (pension) plan, if they have more plans across Europe and are looking to consolidate (the administration) of those plans, we can provide the service."
Susan Livingston, a partner in Brown Brothers Harriman, New York, agreed the foreign custody business will pick up in 2004.
She said a lot of the custody growth BBH expects to see will come from Asia, including Australia, Singapore and Taiwan, and also from Europe, where "private pension systems are continuing to develop."
Asset servicers also expect to see more growth in the administration work they do for alternative investments, particularly hedge funds.
"We expect the hedge fund market to grow," said Mr. Hooley, pointing out that State Street already provides administrative support services for $60 billion in hedge fund assets.
"Alternative asset servicing and the hedge fund administration business will continue to grow in 2004," said Mr. Lynch. "'We put a lot of money into (developing) an alternatives platform for pension funds who want transparency and accurate reporting of returns."