Unchanged Rankings Mask Hotter Battle Among Back Offices
The first quarter was relatively quiet for administrators of bank mutual funds, with no change in the rankings of the five largest players since the end of 1993, a market researcher's data shows.
Concord Holding Corp., of New York, held on to its No. 1 position with $28.4 billion of assets under administration, a slim $700,000 more than PFPC Inc., a unit of PNC Corp., Pittsburgh, according to the rankings by Lipper Analytical Services, Summit, N.J.
But market experts said the apparent calm masks a heating up of competition in the business.
"I think banks are getting a lot smarter," said Mary Anne Houlahan, a managing director of Winsbury Co., an administrator based in Columbus, Ohio, and a unit of Bisys Group, Inc.
Winsbury was ranked seventh by Lipper, with $14.6 billion of assets.
Mutual fund administrators provide a range of back-office services, such as maintaining mutual fund records and preparing regulatory filings.
Banks are permitted to handle these chores. But most opt to hand them off to their fund distributors - companies that organize bank-managed mutual funds and offer shares to the public, fulfilling duties that the Glass-Steagall Act places offlimits to banks.
As banks get more experience managing proprietary mutual funds, Ms. Houlahan and other experts said, they are taking on more administrative work themselves, or demanding pricing concessions or new services from outside administrators.
One of the five largest administrators, PFPC, was administering fewer assets at the end of March than it was at yearend 1993, although the decline was slight, totaling $400,000.
$1.5 Billion Increase
The increases in assets among the five largest administrators were also slight, with the biggest, $1.5 billion, posted by Concord.
Concord's figures do not reflect the contract it won this year to manage two of Keycorp's three proprietary funds, since the administrator is only now taking over these funds.
A big contract that was reflected in the data, however, was Concord's deal to administer $3 billion of assets for Boatmen's Bancshares of St. Louis, previously administered by Goldman, Sachs & Co. of New York, a Lipper researcher said.
Another important contract was landed by 440 Financial Group, to administer $2.5 billion of assets for Old Kent Financial Corp., of Grand Rapids Mich.
Richard Stierwalt, Concords chairman, said that to prosper in the more competitive market, administrators need to concentrate on helping banks sign up more mutual fund customers.
He said banks are willing to pay a premium for these services, as they focus more on growing their funds. But heated competition for more technical services, such as transfer agency and funds accounting, is cutting into margins, he added.
Hopes for Tax Code Change
Mr. Stierwalt also said that the administrator and bank mutual fund market could get a huge boost if legislation is passed that eliminates the taxes investors must pay for transfering money from personal trust accounts into mutual funds.
Most trust conversions have been for retirement plans, because they do not face the tax burden.