State Street signed a joint venture agreement with Korea Exchange Bank (KEB) yesterday (Wednesday) to establish a joint venture for the domestic fund administration business. KK Tse, Asia managing director at State Street’s global investor services group in Hong Kong says that the deal is an outgrowth of a recent law in South Korea requiring mutual fund companies to outsource administration.

State Street and KEB will be taking on an existing strategic alliance between A Brain, an independent fund administrator, and its partner Deutsche Bank. “We go further in our relationship with this joint venture,” Tse says. He explains that State Street had considered a tie up with A Brain, but from a risk management perspective, was more comfortable with a bank. The other option was to enter fund admin by itself, but State Street believes that in a market like Korea, which is large but completely domestically orientated, a local partner is needed for distribution.

KEB is said to fit the bill in two other respects. Firstly, it has a good business handling fund admin for the National Pension Corp among others. Secondly, one of its key shareholders is Commerzbank, which is helping KEB introduce international business practices. In return, KEB will be able to take advantage of State Street’s fund admin experience and technology.

This joint venture will not cover custody; KEB acts as a sub-custodian for many clients and will continue in that role. Fund administration handles matters such as registration, recordkeeping, calculating net asset values, communicating filings to the stock exchange and sending notices to investors.

The name of the JV company has yet to be determined. Tse notes State Street has a similar tie up in the US with Citigroup which is called CitiStreet. “Maybe we’ll call this one KoreaStreet or something like that,” he says light heartedly.