UK investment manager Schroders is to receive £20m (€29.5m) from JP Morgan following the failure of its five-year UK custody and fund accounting outsourcing project with the US bank.
“Together, Schroders and JP Morgan have concluded that their operating models are no longer sufficiently aligned to justify the continuation of the project,” Schroders says.
The US bank has provided UK custody and portfolio accounting services to Schroders since 2000 but now the operation - and, it is anticipated, staff - will be transferred back to Schroders.
“As a result of these arrangements Schroders’ asset management costs are expected to increase from the fourth quarter of 2005 by approximately £2.5m per quarter,” the firm says. It adds that it would receive a one-off payment against this of around £20m from the supplier.
“We value our long-standing relationship with Schroders and we will continue to work together to add value to both firms,” says Michael Clark, head of JP Morgan Worldwide Securities Services in a statement.
“This mutual decision positions JP Morgan’s business for long-term growth through a relentless focus on delivering value to clients.”
Schroders’ decision follows research published by Oxford Metrica which found that outsourcing boosts asset managers’ share price by around 10%.
Schroders said that the transfer is expected to be completed by the end of September and that clients would not be affected. JP Morgan would continue to provide other custody, accounting and ancillary services.