Asset management back-office deals set to grow

EUROPE – The market for outsourcing back office functions in the European asset management industry will reach 758 million dollars (622.5 million euros) by 2006, says Datamonitor.

The market analyst firm said: “This market has emerged in Europe as a series of large-scale lift-out deals, with traditional custodians (for example State Street, Bank of New York, Mellon, JP Morgan, Citigroup, HSBC), demonstrating keen interest in taking over entire back-office operations of asset managers.”

It added the trend is created a new market for the vendors of back-office applications.

Datamonitor said the next stage for custodians “will be to take on additional clients and capitalize on the economies of scale of these operations and platforms”.

But they still need to integrate systems and operations, the report said. And they would also have to develop 'consulting capability'.

And partnerships with custodians would be “the only remaining route” for those outsourcing providers wanting to enter the market.

"The sudden emergence of large-scale BPO business process_outsourcing deals in asset management is as much a result of custodians aggressively pushing the market into this direction as it is a result of mere demand from the asset management community,” said Datamonitor analyst Daniel Lessner.

“The fact that banks need to expand their custody business to evolve into a wider BPO offering has 'un-naturally' accelerated the development of this young market, literally leaving other BPO providers to stand and watch as it has unfolded."

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