WestpacTrust general manager card and financial services Girol Karacaoglu says the bank is currently going through a process in deciding what functions it wants to keep itself and those it wants to outsource.
The decision to form this strategic alliance builds on the earlier one where the bank outsourced management of its New Zealand equity portfolio to AJ.
Karacaoglu says AJ will take over 17 of its funds (including property, international shares, global bonds etc) but not the recently launched Home Loan Trust which has been experiencing strong inflows.
The deal with AJ is similar to the arrangement the National Bank has with AMP Asset Management, where the bank decides what funds it wants and AMP develops and manages them.
AJ will provide the bank with the associated middle office administration, including settlements and valuations, and WestpacTrust will reinsure AJ's range of life insurance products.
Karacaoglu says although WestpacTrust is outsourcing funds management that doesn't mean the bank is just a sales and distribution operation.
He says WestpacTrust will continue to maintain a research and product management function.
Karacaoglu says there are a number of ways the alliance can be expanded. For instance AJ could sell Westpac life insurance policies and the bank could promote AJ's master trust through the branches. There is even a possibility AJ could offer WestpacTrust banking services in the future.
"It has to be taken step by step," he says. "It could extend beyond being an arm's length funds management arrangement."
However, it won't extend to WestpacTrust selling AJ funds: "I'm not going to distribute AJ retail products," Karacaoglu says.
He says AJ was the only firm WestpacTrust talked to when it decided to outsource funds management. The reasons for this are that AJ is a specialist fund manager (and in Karacaoglu's word better at it than the bank), plus both firms had a five star rating from research house Morningstar.
AJ will probably take over the money management role in November.
Besides this deal with AJ, WestpacTrust also outsources its back office administration functions to Jacques Martin New Zealand.
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