You don’t have to be small to be nimble

Dan McNamara, chief strategy officer (CSO) at MUFG Investor Services, believes there is a misconception about larger fund administrators lacking in agility when it comes to technology and innovation. Here, he explains the bank’s ethos in servicing its clients through a broad range of offerings as MUFG Investor Services continues to invest and expand.
By Jon Watkins

Do you believe clients are weighing up bank-owned versus independent providers from a technology and innovation perspective?

We don’t think it’s binary. We, like a lot of other big banks, have bought a FinTech provider with the acquisition of the ISFT which has really bolstered our dev ops capability. Also, we had our new CTO, Evangelos Skianis, join in 2019 and we’ve started a journey in changing and evolving our technology function to include a lot more in-house development. Those two factors combined have allowed us to quickly launch our FX passive currency overlay product, helped us go to market with our ESG and enhanced LP services product, and also develop a lot of data management tools. 

I do understand that premise that a lot of big bank-owned companies have horrible infrastructure that they’ve got to work with, but we’ve been able to buy someone, bring them in, keep that creativity, that quick manoeuvrability and responsiveness, and make it work. 

You don’t have to be small to be nimble in many respects. 

What does being part of a larger organisation bring to the table for clients in 2021?

We’ve got a very large amount of assets under administration – to the point where if we were a fund manager that would make us quite a large fund manager – so we see a lot of the market and we understand the problems. We go to our clients with a comprehensive offering and we think being bank-backed helps with that.

The most obvious way is with the financing that we can provide. MUFG is the biggest bank in Japan, the biggest bank in the world from a balance sheet perspective and we have a very high credit rating. We also have the ability to provide bank accounts, treasury and liquidity services. We’ve also talked to your magazine about the enhancement of our agency securities lending services as well over the last 18 months. 

We bring that whole array of services and, because we’re not compartmentalising and we’re not modular, we can react to clients’ needs. On top of that, being bank-backed allows us to make big bets and long-term bets. We can invest significant capital into products and into the business over time. Also, being part of a Japanese institution, we have a unique timeline perspective with the time horizon and the investment horizon, and I think that really helps. 

There’s a perception in the market that bank-owned administrators are either pulling back or not investing. But given your level of activity in new launches and acquisitions and technology developments, do you see yourself as competing more with some of the larger independent players too?

We’ve got a blue-chip stable of clients, tier-one asset managers and investment managers around the world. So, we certainly think that the capital and the ability to invest for the long term is what makes a relationship like that sticky and stay functioning.

Also, the ability to bring in more products over time to keep that relationship growing and fresh, and the ability to leverage the wider bank and the distribution network is something that we’re very focused on. 

I think that enables us to really mine those very big asset managers, keep them happy as clients and provide them a solution. 

There are also smaller clients in the Maitland book and that’s why I think that this binary view doesn’t sit so well with us. Because on the maintenance side, we’ve got a small group of clients who are very innovative and very keen to understand what we can do with technology, how to make things cheaper and makes things faster.

I’ve also heard before that you don’t have much client churn. How have you prioritised retaining existing clients?

It’s basically our key KPI. If you win big clients, they stay with you and they add products.

That’s the best marketing you can have and from an economic perspective, it means your growth is a lot cheaper. You’re not having to run to stand still. 

Are clients becoming more demanding when it comes to technology and innovation?

Innovation is absolutely a big theme and this is why we’ve invested in IT infrastructure and an IT team that can be responsible to create new solutions responding to client needs. 

It’s a big part of how we’re looking at data ourselves. We’ve been speaking out in the market about our common data platform, standardising how we record data and making it easy to interface with, making it easy to then build analytical tools off the back of that. 

But there’s a lot of time and investment that goes into building those foundations and we’re spending a lot of time for ourselves. We see the future and we’re in discussion with clients around data as a service where we can host for them. We’ve invested all this time and money in our data protocols and data approach. We can do all that for them, leaving our asset manager clients free to focus on managing their client’s money for the best return they possibly can get. 

It’s our day job to be able to do the middle- and back-office. If you’re doing it, outsource it to us.

How are you keeping up with growing demand for administration in new areas? 

The real asset space has still got a way to run. We got into direct lending more formally and accelerated our investment into that shortly after I joined in 2019. So, we’re hiring people and implementing systems.

There’s a number of ways where we’re building out our capability, including LP services for private equity investment.  You can’t just have tech and this is where we’re different to a tech provider. We provide professional services around it. 

We still see alternatives as a key area of focus – and that’s another area where we feel we’re quite unique as a bank-backed player – we’re an alternatives shop. 

Frankly, none of the other bank-backed players have that same level of focus on alternatives. We see that still growing even in the liquid alternatives space. That whole 60/40 investment model is being questioned right now. That’s good news for alternative assets as a whole, and for real assets within that alternative spectrum. So it’s a tech play, it’s a human play and it’s us being able to stand on our delivery to some of our big multi-strategy clients in the past.

Buy versus build, organic versus inorganic, we’re of a size where both are an option for us. 

We are disciplined. We are part of a Japanese bank where we’re thoughtful and we invest for the long term. We don’t get out of products, we don’t get out of areas. It’s a long-term commitment, so we’re very careful about taking those decisions.