Glasgow Investments Managers Becomes First Client Of Trustee And Depositary Services As ABN Amro Mellon Plugs Gap In Fund Servicing Armoury

Mackintosh Investment Funds ICVC has appointed ABN AMRO Mellon Global Securities Services as depositary and global custodian
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ABN Amro Mellon elected in 2004 to plug the most obvious gap in its fund servicing armoury: a trustee and depositary function. It hired former Citibank custody chief John Morris as Head of UK Trustee & Depositary Services to drive the effort, and he can now point to a first client for the service. Mackintosh Investment Funds ICVC, a new OEIC umbrella fund managed and marketed by Glasgow-based Glasgow Investment Managers Ltd, has appointed ABN AMRO Mellon Global Securities Services as depositary and global custodian.

The deal is an important one for ABN Amro Mellon. Although Mellon European Fund Services has acquired and developed a substantial fund accounting and transfer agency business in the UK, ABN Amro Mellon has until recently enjoyed greater success in securing pension fund custody business. However, the joint venture bank is now ramaing up its efforts to win fund management business, adding a Luxembourg operation this year to the Frankfurt office it opened in 2004 and the Dublin operation of Mellon European Fund Services. The bank can now offer bundled custody, fund accounting, transfer agency and depositary services to European fund managers

Though this is the inaugural mandate for ABN AMRO Mellon’s UK Trustee & Depositary Services arm, Morris emphasizes the Continental European dimension to the deal, which he promises will be followed by three more new business wins in the coming months. “This has to be seen in the context of what ABN Amro Mellon is doing in Europe as a whole,” he says. “There is a bigger picture than the UK, because more and more fund managers want to buy services across Europe.” Morris also points to the long term growth prospects of the fund servicing industry in Continental Europe, as employers shift from unfunded, defined benefit pension schemes to funded, defined contribution schemes.

The realization of that opportunity is being facilitated by the rise of the Open Ended Investment Company (OEIC) which has, inter alla, united -as best it can, given the differing legal histories of Britain and the major Continental countries – the British concept of trusteeship and the Continental idea of the depositary bank. Both seek to protect the interests of investors from misleading or inaccurate net asset valuations, and the loss of assets. The Dutch-American joint venture will be looking to its newly acquired depositary expertise to help it win more OEIC-based business in Frankfurt, Luxembourg and Dublin.

In the UK market, by contrast ABN Amro Mellon is confronted by a tight group of incumbent providers of trustee services: Bank of New York, Citigroup, State Street and RBS, whose sale of its custody business to Bank of New York back in the 1990s enables the Scottish bank to portray itself as the independent provider. However, the market reality is that most fund managers prefer to buy bundled custody, fund accounting, transfer agency and trustee/depositary services, and ABN Amro Mellon can now compete with the major global custodians on all four fronts. Morris says the conflicts at interest that arise can be “appropriately managed.”

The Mackintosh OEIC is one of the first UK funds to make use of the new Collective Investment Scheme Sourcebook (COLL) provisions, implemented by the UK Financial Services Authority (FSA) last year, that allow fund managers to gear up their portfolios through the use of exchange-traded derivatives such as puts and calls up to a ceiling of 120% of the NAV. John Morris says the willingness of ABN Amro Mellon to provide technical support during the set-up phase of an innovative fund was a key factor in winning the business. Mike Balfour, Chief Executive of Glasgow Investment Managers, agrees. “We valued the support of ABN AMRO Mellon’s trustee and depositary team, and their in-depth understanding of the regulatory environment in which we are launching this innovative fund, and we look forward to a growing relationship,” he says.

The new fund is the first UK OEIC to be launched by Glasgow Investment Mangers, and will follow a similar investment approach to their Glasgow Income Trust, with a goal of high income with growth in both income and capital in the longer term.

The Authorised Corporate Director of the Mackintosh fund is Sinclair Henderson (ACD Services Ltd).