Bank of New York Mellon has revamped the product lineup in its asset management division as the custody bank tries to offer lower-cost funds that investors prefer.
The $323 billion-asset bank has eliminated 80 wealth management products within the past two years, Mitchell Harris, the CEO of the investment management division, said at the Morgan Stanley Financials Conference on Wednesday. At the same time, BNY Mellon has introduced 89 new products.
The moves were necessary because BNY Mellon had an outdated product offering that consisted largely of actively managed funds, which are more expensive for investors than passively managed vehicles, such as exchange-traded funds, Harris said.
“Having [actively managed] products compete against that obviously created a lot of outflows for our business,” Harris said at the conference.
In response, BNY Mellon is developing a new lineup with passively managed funds like index funds and a new breed of active funds.
BNY Mellon’s asset management businesses “have been in decline since 2008,” Harris said. “They’ve been trapped in the wrong part of the business.”
BNY Mellon has developed new investment funds that focus on specific industry sectors, such as a fund for companies in the so-called internet of things business, and other types of funds that offer high returns.
“You have to … move to where the client sentiment and client buying power is moving to,” Harris said.
Financial results have recently improved at BNY Mellon’s asset and wealth management division. Total revenue from the group rose 13% to $1.1 billion in the first quarter from a year earlier.
BNY Mellon may eliminate more products in its asset-management business, although it has not yet determined how many, Harris said.
“The interesting thing about closing down products, as opposed to building new products, is that you can get clients pretty quickly” when launching new products, he said. “Closing products is difficult because you’re surrendering potential revenues unless you can merge the product and you’re not necessarily getting an equal offset on expense.”