Bermuda Trust, a wholly owned subsidiary of Bank of Bermuda, and United Overseas Bank (UOB) have formed a joint venture company, Asia Fund Services, to handle transfer agency services for fund managers in Singapore - and ultimately the rest of Asia.
"We both had technology that was getting tired and needed to be refreshed, and we both realized how important the transfer agency piece is in a fund manager's value chain," explains Paul Smith, global head of funds services, Bank of Bermuda's fund administration division.
Fund management, particularly for retail customers, has become less about performance and more about service, Smiths says. The TA handles registration, so a customer buying XYZ Fund pays in and redeems out via TAs, often through the distributor in the middle. Fund managers increasingly emphasize good reporting on which customers are buying what products; good organization in paying distributors their fees; and handling registration of direct customers - all the TA's work.
"The TA is the core management information system telling a fund manager who is invested in which of their funds," Smith says. Of all the processing functions, the TA is the messiest, and TA systems the most complex and expensive.
Finding a partner to share the burden of finding and implementing a new system made sense; the JV is finalizing talks with a IT solutions provider. In addition, TA work is so volume-dependent that both Bermuda and UOB welcomed sharing their customer bases. Thanks to UOB, Asia Fund Services will cover 250,000 individual investors. The JV is expected to begin operations no later than January, once the incoming system is adjusted to handle contributions from Singapore's Central Provident Fund. Says Smith: "We'll have the most scale in Singapore so we can drive costs down for fund managers and improve service."
Each partner put in S$3 million of paid-in capital and own the JV 50/50, with two members of the board of directors apiece. Bermuda Trust's managing director, Nigel Stead, will be both chairman and CEO, although once the firm is established, it will hire a CEO from outside so Stead can return full-time to Bermuda.
The other three board members will be Smith, plus UOB's Bill Chua, executive vice president of operations, and Kuek Tong-Au, executive vice president of corporate services. Both Bermuda Trust and UOB's existing TA group have about 25 staff. Although the merger's new IT is supposed to create efficiencies, for now the word is staff will be needed as the business expands.
Asia Fund Services will cover all of Bermuda Trust's current retail TA work in Singapore, but not hedge funds, which Bermuda will continue to handle itself. Moreover, Bermuda Trust will continue separately to handle its other core businesses in fund administration, trust and custody. Bermuda and UOB's TA clients will not really be aware of the JV; they will continue to interact with Bermuda or UOB, which will then pass on TA work to Asia Fund Services.
The JV will, however, also go after its own client base in the area of back-office outsourcing - something Bermuda and UOB currently do not do. This involves pitching private banks, insurance companies, independent financial advisors and brokers that have back-office needs built around investors.
