Administration services: $3.5 billion under control
Good Returns' latest survey of wrap accounts and master trusts looks at how much investment money is under administration, and what each of the providers are doing.
Friday, September 3rd 1999, 12:00AM
This quarter's survey of administration systems (wrap accounts, master trusts etc) is more comprehensive than the earlier one and includes a number of additional players.
The biggest player in the market at present is Jacques Martin which runs services for Spicers Portfolio Management, New Zealand Financial Planning and several of the smaller players including Colonial's Navigator and Pathfinder wrap accounts.
Spicers, which is the only master fund provider that does not provide information for the survey, is also the biggest. Good Returns estimates the firm has about $750 million in its system.
The next biggest provider is New Zealand Funds Management, which has two core systems, Money Manager's First Master Trust ($460 million) and the Strategic Investment Service ($335 million) which is used by a number of independent advisers throughout the country.
The third biggest player is Tower Trust, which administers money for Tower group companies as well as New Zealand Assets Management, JB Were, PriceWaterhouseCoopers, Resource Financial Planning and Boxer.
Tower Trust (formerly Trustees Executors), which wasn't included in the previous survey, has $540 million under administration. The company recently announced a strategic alliance with one of the world's largest suppliers of investment management software, DST International. Under this arrangement Tower Trust is looking to provide enhanced back office administration services.
"The strategic alliance which will result in the creation of Tower Trust Fund Services (TTFS), the country's leading supplier of outsourced back-office services, " TTFS general manager Mark Paterson says.
Paterson says the alliance will reinforce TTFS's position in third-party administration and it will present growth opportunities.
|
Provider |
Service |
$ Mill |
|
Jacques Martin |
Spicers |
750(1) |
|
Jacques Martin |
New Zealand Financial Planning |
350 |
|
Jacques Martin |
Navigator |
34 |
|
Jacques Martin |
Pathfinder |
20 |
|
New Zealand Funds Management |
First Master Fund |
460 |
|
New Zealand Funds Management |
Strategic Investment Service |
335 |
|
New Zealand Funds Management |
Medical Assurance |
30 |
|
New Zealand Funds Management |
Liberty Group |
25 |
|
Tower Trust |
Boxer |
38 |
|
Tower Trust |
Others (2) |
502 |
|
Ausmaq |
BNZ AMS |
220 |
|
Ausmaq |
Others (3) |
115 |
|
Armstrong Jones |
Private Portfolio Service |
308 |
|
Sovereign |
Aegis(4) |
376 |
|
TOTAL |
|
3.56 bill |
(1)
Estimated(2) Major users includes: NZ Assets Management, JB Were, PriceWaterhouse Coopers, Resource Financial Planning and Tower groups
(3) This includes Grosvenor, which supplies services to Rutherford Rede and Quantum
(4) This includes Reeves Moses InvestorCare, Broadbase and Northplan
The main administration service provider not included in the survey is InvestmentLink. InvestmentLink is clearly a major player, however it is structured in such a way that the advisers are the only ones who the details about how much money is administered through the system.
InvestmentLink is expanding its system and will soon be providing data for two additional fund managers.
Part of the survey also looks at what the split is between retail and wholesale funds, i.e: how much of the money in the funds is captured in the retail funds flow surveys compiled by IPAC and Morningstar, and what percentage is accounted for in the wholesale surveys.
While administration systems are responsible for sucking some money out of the retail funds and into the wholesale sector, the large proportion of the funds remain in retail, albeit at a mezzanine level.
Under this arrangement the manager is collecting a thinner fee.
"The distinction between wholesale and retail is more blurred than at first glance," Aegis general manager Paul Baldwin says.
A fund where a client gets a lower management expense ratio (MER) than a retail investor may include discounted retail where the manager rebates part of the MER back to the client, and mezzanine. Mezzanine, he says, is not retail nor is it wholesale.
Baldwin says in Aegis about 75 per cent of the wholesale MER funds are actually retail funds where the MER is discounted back to the client, these would therefore be included in retail surveys.
The majority of the providers are using retail funds in their offerings, the main exception to this observation at present appears to be Spicers. The funds its runs are not included in any of the retail surveys, nor are they researched by those firms, however they are included in the likes of the Mercer survey.
All the big firms are using administration services, and there is a trend for small advisory operations to sign up to various offerings. Smaller firms tend to be opting for the services provided by the likes of Armstrong Jones, New Zealand Funds Management (through the Strategic Investment Service) and InvestmentLink.
Despite being widely used the amount of money under administration is about 22 per cent of the total retail funds under management. The survey shows there is about $3.5 billion under administration, while IPAC Securities says that at the end of June the total net funds under manager was $15.9 billion.
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