Top 3 Bank Fund Service Firms Nearly Doubled Business in Year

The leading bank mutual fund administrators continue to strengthen their grip on the proprietary assets they service.

Bisys Investment Services Group, First Data Investor Services Group, and SEI Corp. led the service-company pack in the quarter ended Sept. 30, according to data compiled by Lipper Analytical Services, Summit, N.J.

The trio's combined bank fund assets hit $131.4 billion, almost double $76.6 billion controlled by the three largest fund administrators a year ago.

Overall, the assets administered by the leading 15 bank fund administrators rose 4%, to $284.2 billion.

A current wave of consolidation among fund administrators mirrors the mergers among their bank clients. As a result, a shrinking number of companies claims an increasing share of the market.

Several executives said they expect the trend to continue.

Essentially, this will be a game where SEI, Bisys, Federated and First Data Investor Services Group will survive, said Kenneth R. Hoffman, president of Optima Group, a Fairfield, Conn., mutual fund consulting firm.

Bisys, whose largest clients include BankAmerica and BancOne, acquired Winsbury Co. in 1993, and this March picked upConcord Holding Corp., last year's top administrator.

Second place now belongs to First Data Corp's. Investor Services Group. The company's Shareholder Services Group bought nearby 440 Financial Services Group, Worcester, Mass., last year.

Mutual fund administrators perform an assortment of back-office functions including transfer agency, fund accounting, compliance, and shareholder servicing.

Some also serve as fund distributors, a role the Glass-Steagall Act bars banks from for their own funds.

Increasingly, many banks are divvying their business among specialized vendors or bringing some in-house, rather than buying comprehensive administrative services from one provider,

"Bank buying behavior is changing very quickly," as they amass assets and expertise, said John O. Florence, executive vice president of sales for bank funds at First Data.

Now many administrators are scrambling to offer an assortment of services to preserve as much bank business as they can.

"What I'd like is all full-service customers, but that's a pipedream," said Ronald Petnuch, senior vice president, Federated Services Co., Pittsburgh.

In July, Federated lost its its largest bank client - First Union - when the banking giant internalized its fund administration.

In the increasingly competitive market, the options for administrators seeking to improve their business are limited.

"There's the potential for share of the market to change through acquisitions" of other providers, said John O. Florence, executive vice president of sales for bank funds at First Data. "But our focus today is differentiation of our services from our competitors."

For those firms that survive, mutual fund asset growth through market appreciation and new purchases is a consolation.

"Along with the rest of mutual fund industry, in general, our clients have seen very good growth in assets," said Robert J. McMullan, chief financial officer for Bisys, based in Little Falls, N.J.

Some of the winners are actually enjoying the shakeout.

"We've seen our balances grow by 30% this year - it's partly market appreciation but also reflects our effort to get new business," said Henry H. Greer, president of SEI, which is based in Wayne, Pa.

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