FUND ADMINISTRATION

BNY Mellon eyes further outsourcing deals from alternative managers

New pressures on buy-side could see more outsourcing deals from asset and alternative managers.

By Joe Parsons joe.parsons@strategic-i.com April 21, 2017 10:26 AM GMT

BNY Mellon is expecting to see more outsourcing deals from asset and alternative managers as a result of new pressures on buy-side business models.

The world’s largest custody bank reported a growth of 4% in investment services fee revenues in the first quarter of the year, after winning $109 billion in new business.

Most recently, BNY Mellon announced it will provide fund administration services to PGIM Real Estate’s US funds, representing $33 billion in assets under management.

On the bank’s first quarter earnings call Brian Shea, CEO of its Investment Services business, explained the outsourcing deal with PGIM represented: “a great example because most of the market is still in-sources their real estate to fund administration and this is a big growth opportunity for us.”

BNY Mellon has bolstered its Alternative Investment Services business following the completion of the real estate fund administration outsourcing deal with Deutsche Asset Management in 2015.

Shea added regulatory and cost pressures on asset managers is also becoming a driver of new business, and said it plans to invest further in middle-office technology services for buy-side clients.

“We think the asset servicing business which is going to benefit from secular trends which are putting pressure on asset managers to transform their operating models and to outsource more of their solutions,” said Shea.

“So that's why we see growth opportunities in the middle office space, we see growth opportunities from technology solutions.”

BNY Mellon also reported a 7% increase in clearing services fees of $376 million, which were primarily driven by higher money market and mutual fund fees, the bank stated.

“We’re benefiting from the fact that self-clearing firms are reconsidering whether they want to clear for themselves and Pershing has a solid pipeline,” added Shea.