Taking direct aim at State Street Corp.’s dominant position as custodian and accountant for U.S. mutual fund companies, Bank of New York Co. said it will assume administration for $26 billion of fund assets managed by Boston’s John Hancock Funds.

Though the deal is small in relative terms — Bank of New York is one of the world’s three largest custodians, with $6.8 trillion under administration — the company said it is important symbolically. State Street of Boston, another custodian in the top three, with $5.8 trillion of assets under custody, is the leading provider of these services to the U.S. mutual fund industry, with a commanding 40% market share and $3 trillion under administration.

Bank of New York offered its retail branch and brokerage network as a carrot to lure John Hancock and said it can offer similar incentives to other asset managers. Bank of New York president Gerald L. Hassell, in an interview Tuesday, described the Hancock business as a “partnership” in which Hancock would also benefit by being able to sell its funds and annuity products to Bank of New York customers.

Mr. Hassell said it would not let State Street’s dominance continue uncontested much longer. “State Street has had it for too long,” he said. “They deserve and should have some competition.”

Bank of New York will announce the John Hancock deal today.

The New York company also plans to make a run at State Street’s other dominant niche: administration and accounting for U.S. pension funds, a business Mr. Hassell admits his company had largely ignored. It is changing its marketing effort to focus on asset managers, who have a say in which custodian their pension fund clients pick, Mr. Hassell said. “It is a large and important part of the marketplace, and we should have a larger share,” he said.

Bank of New York, State Street, and J.P. Morgan Chase & Co. have jockeyed for position as the world’s largest securities processors for years, driving smaller competitors out of business and stealing clients from one another.

In the U.S. mutual fund market, Bank of New York currently ranks second, behind State Street, with a 17% market share in fund administration and accounting, or about $1 trillion under administration. John Hancock Funds, a subsidiary of John Hancock Financial Services, is consolidating its custody contracts. State Street had provided custody and administration for $2.8 billion of assets in 20 Hancock funds. Boston-based Investors Bank and Trust handled $20 billion of assets in 48 Hancock funds.

State Street, far from seeing the loss of the Hancock business as a defeat, is shrugging it off. “The gap is insurmountable,” said Ronald E. Logue, State Street’s vice chairman and chief operating officer, referring to Bank of New York’s challenge. “It’s too little, too late.”

Winning business from rival State Street clearly has Bank of New York believing it can do more. Mr. Hassell said the company would continue to pitch its services to add to its current roster of clients, which includes Bank of America Corp.’s mutual fund complex and the Dreyfus Funds, owned and managed by Mellon Financial Corp.

Fees are the lure. Custody is, generally speaking, a commodity business, but it brings opportunities to cross-sell a variety of potentially lucrative sidelines, such as trade execution, securities lending, and foreign exchange. Last year, Bank of New York reported 26% growth in fees from securities servicing, to $1.91 billion.

The business requires massive investments in technology each year just to keep up with the latest. State Street, for example, prides itself on its fund accounting capabilities. It is the largest provider of daily pricing, supply data for 4,206 U.S. mutual funds, according to Nasdaq. That dwarfs the No. 2 in this business, PFPC Inc., a unit of PNC Financial Services Group Inc., which supplies daily pricing on 972 mutual funds. Bank of New York ranks ninth, with 312 funds, according to Nasdaq.

Bank of New York has a distance to go to catch up to State Street, which recently signed up Merrill Lynch & Co. as a client, landing roughly $200 billion of assets in 227 Merrill funds. State Street boasts a client roster that includes many of the largest U.S. fund complexes, including Federated, Pimco, MFS, and Strong funds.

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