BNY Mellon’s new CEO, Charles Scharf, has targeted exchange traded funds (ETFs) as a focus to improve its asset servicing business.
Speaking on the third quarter earnings call, Scharf explained the custodian has lagged behind its competitors in attracting ETF business from asset managers.
“Our asset management and asset servicing flows today are clearing suffering from not having scale in ETFs,” Scharf said on the call.
“When you look at our flows versus others you’re not going to see the same kind of low growth that we see elsewhere, and we do have the same issue in the asset servicing side where our competitor has a much more sizeable business themselves.”
State Street is the largest asset servicing provider for ETFs, and boasts high profile clients including BlackRock’s iShares.
Speaking on the sidelines of Sibos 2017 in Toronto, BNY Mellon’s CEO of asset servicing, Samir Pandiri, told Global Custodian that servicing ETFs will be the next key battleground to win client business.
Custodians are seeing new demands from asset manager clients that have shifted their investment strategies from active to passive investing, such as ETFs.
Asset servicing fees increased 4% to around $1.1 billion in the third quarter for BNY Mellon, off the back of $166 billion in new assets under custody and administration (AUC/A).
BNY Mellon reported a new record of AUC/A to $32.2 trillion, an increase of 6% due to higher market values and a weaker US dollar.