EUROPE – Scottish Widows Investment Partnership today renewed its investment operations outsourcing agreement with State Street.
“It was the first contract of its type and size to go through in Europe, and it is also the first to go through the renewal process,” said SWIP chief executive Chris Phillips. Financial terms were not disclosed.
“It was a groundbreaking deal and an industry first regarding the proportion of assets outsourced. But we have no regrets.”
IPE reported in June that SWIP was reviewing the deal. A number of similar outsourcing deals have hit the rocks recently. Logue and Phillips were adamant that there was no immediate financial incentive for the renewal.
“There are always financial negotiations, but that is more a long-term matter. This is a straightforward commercial deal with service level agreement,” said Phillips.
He said: “It was a competitive process. State Street has more than kept pace with the way the industry has developed. They are one of the most cost-efficient managers in the UK, if not in Europe.”
The initial five-year contract - concluded in October 2000 – has been renewed for a further eight years with between 250 and 300 employees working on the partnership.
“It will be worth lots of money over many years,” commented State Street chairman and chief executive Ron Logue.
According to State Street, their outsourcing deal has created significant opportunities for UK and European investment managers.
“We are creating new ways of delivering business and products to the industry. This is going to take the outsourcing industry to a new level,” Logue stated.
However there was some scepticism as to whether this industry would be boosted by the SWIP-State Street renewal.
“While a large number of investment managers have discussed doing similar things, it is a big step and takes time. The market will wait for legitimate service providers. I don’t expect to see a spate of signings,” Logue explained.
According to State Street, all clients will run off an enterprise system in the not-too-distant future.