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Friday, June 27, 2003

Bisys Targets SMAs

Reported by Sean Hanna, Editor in Chief

Bisys is fitting together the final pieces for its nascent separately managed account program. Officials at the firm expect to have it ready for clients by the end of the Summer. In the next few weeks the back-office specialist is planning to announce the technology partner it will use to help create the platform.

"We are getting off the ground right now," George Evans, executive vice president of business development for Bisys Investment Services, told the MFWire. "We clearly see this as part of a standard offering by the end of the summer." He noted that Bisys has been developing the offering with input from its client base.

The service promises to streamline how asset managers work with separately managed account distribution platforms by providing them one access point through which they can exchange information with all of their partners. The service is expected to perform account administration, portfolio accounting and administration, settlement services, billing solutions, and comprehensive reporting functionality.

"It will be one central recordkeeping repository," explained Evans. He noted that no other firms currently offer this type of service, although both BoNY and State Street are apparently working on similar projects.

Evans added that Bisys was drawn to separately managed accounts by forecasts of the market segments growth. Indeed, it was Bisys' acquisition of Financial Research Corp. and the trend data that came with the research firm that drove the point home at Bisys.

"As we started to look at some of the projections it became clear that it was time to make that investment," explained Evans. "As clients start to diversify their business, we thought we needed to diversify our business."

Bisys intends to offer the new service to its clients and other asset managers through its existing sales force dedicated to mutual funds. "This outsourcing decision is being driven by the same people who drove mutual fund outsourcing a decade ago," explained Evans.

Bisys has been putting the product together since February under the direction of Kevin Keefe, senior vice president of Separate Account Services at Bisys. Keefe had headed FRC's separate account consulting practice before making the shift in duties.

"Managers are having a real tough time keeping the operations issues of working with the different platforms," said Keefe in an interview. He explained, that under current practice, managers must train staff to be familiar the system of each of the platforms that they are a part of.

"If a firm is managing assets in two different systems -- say Salomon Fiduciary Services MATES and Merrill Consults APL -- then everyone must get familiar with both systems," he explained. Even two different installations of APL will have different look-and-feels, he added. By outsourcing to Bisys they will only have to maintain knowledge of and connections to one platform.

"Instead having to go to two different computers, a manager can do everything with one computer. They only have to know one language and one piece of plumbing," said Keefe.

Bisys also hopes to be able to achieve economies of scale. While each manager must build links to each distribution platform anew, Bisys will be able to reuse work and theoretically offer the connections on a more efficient basis to managers than they can achieve on their own. 

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