UK/SOUTH AFRICA – Investec Asset Management has entered “exclusive discussions” to outsource its institutional administration to State Street in the UK and South Africa.

The arrangement will enable Investec to focus on its core business of fund management, following the growing trend in the investment management industry to outsource administrative functions.

Only yesterday, ISIS Asset Management announced it had reached “heads of agreement” with J P Morgan in respect of a deal to outsource a number of its operational functions.

Says Investec: “By leveraging off the institutional technology platform of State Street, it will save on future system costs and will also result in a more robust business model by introducing variability into the cost base.”

Investec has already outsourced its OEIC administration to IFDS, an affiliate of state Street. Regarding the institutional administration, Hendrik du Toit, chief executive officer of Investec AM said that the intent was for the company’s institutional administration staff in the UK to join State Street.

In South Africa, it is intended that the affected Investec staff will form the base of a start up domestic investment services operation by State Street.

State Street has already a custody business in South Africa, having had a relationship with Nedcorp Bank in South Africa since 1998. Du Toit said that State Street’s knowledge of the market had been compelling. A spokeswoman at State Street said that there had always been plans to expand the business, and that the company was “delighted” to be in talks with Investec which has a large presence in South Africa.

Talks will continue for the next few months, said both sides.

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