Chase Manhattan Corp.'s global custody unit said Tuesday that it has formed a $20 million joint venture with Investia, a London-based e-commerce company, to create mutual fund supermarkets for European banks, insurers, and brokerages.
FundsHub will outsource technology that enables financial institutions to offer customers thousands of investment funds, unit trusts, and mutual funds. The supermarkets will be privately labeled and customized for each institution, the companies said.
Initially available only to companies in the United Kingdom, the service will be offered across Europe in early 2001, said Gareth Thompson, director of marketing at FundsHub. Investia controls 55% of the new venture, Chase 35%, and management of FundsHub 10%, he said.
Chase, through its Global Investor Services unit, provides custody services for mutual fund companies, insurance companies, and pension funds. In that role, Chase holds assets for them and settles trades. But it had not found a way to effectively help clients distribute their funds, said Mark Tennant, senior vice president of the unit.
FundsHub gives financial institutions "software to do it themselves, which is far more effective" than Chase trying to distribute the funds, he said. Chase, which has no retail presence outside the United States, does not have plans to launch its own fund supermarket overseas, he added.
Mutual fund supermarkets, which were pioneered by Charles Schwab & Co., have quickly taken hold in the United States in recent years, but are just beginning to catch on in Europe, where mutual fund investing is not yet as popular and Internet use not as pronounced among retail investors.
Companies such as Fidelity Investments, Schwab, and Prudential PLC's Egg online bank are among those that have launched supermarkets in the United Kingdom, while Deutsche Bank AG recently launched one in Germany and has plans to expand elsewhere in Europe. Citigroup Inc. also has a supermarket in Germany in the works.
"This year is going to be the year that you're going to see a propensity of them," especially in the United Kingdom, said Thomas Marsh, a consultant at Cerulli Associates of Boston. The trend will be accelerated by an electronic trading platform being developed to allow funds in the United Kingdom to be traded more efficiently, he said.
"Trends drift from the U.S. to the U.K. to continental Europe," he said.
Currently, fund distribution in Europe is dominated by major banks and the range of funds available to investors limited, but FundsHub hopes to change that. "Consumers are being underserviced and overcharged," Mark Collier, chief executive of FundsHub and the co-founder of Investia, said in a statement.
FundsHub provides the technology and operational linkage between fund companies whose products make up the supermarket and distributors who sell the funds. FundsHub will also manage the clearing and settlement with fund companies.