Sumitomo Mitsui Trust Bank, Japan's biggest trust bank, is expanding operations in Hong Kong, New York and Luxembourg to build on its acquisition of Daiwa Securities’ hedge-fund administration and trustee business.
After completing the purchase in November, SMTB has taken over all Daiwa's clients, operations and around 200 employees and has high hopes for the new business, says Joost Lobler, head of sales for Asia ex-Japan.
The firm plans to expand its four-strong Hong Kong team into a full operations office of up to 10 staffers offering investor services and fund accounting to all its offshore Asian clients. The bank currently services these Asian clients from its night desk in Dublin.
Lobler says the goal is to be fully operational with the new sales and relationship managers on board in Hong Kong by around October, by which time a new fund-accounting system will also be established globally.
Meanwhile, SMTB's New York office, which has a substantial custody operation, will add fund administration to its services, so that the bank can provide continuous service between Dublin, Hong Kong and New York.
The firm is also applying for a fund admin licence to expand Ucits fund services beyond Dublin – currently the group’s only fully operational fund accounting centre – to enable it to offer services such as net asset value (NAV) calculation for Luxembourg-domiciled Ucits funds.
SMTB intends to use the newly acquired hedge-fund admin business as a platform to grow the group’s global fund admin service, says Lobler, in accordance with its aim of doubling assets under administration by 2015.
He declined to disclose the current assets under administration figure, but he told AsianInvestor in July that they stood at $51.58 billion.
Once the New York and Hong Kong businesses are fully operational, Lobler says SMTB will be able to calculate NAVs significantly faster for hedge funds, as it will be able to pass the book across the Asia, Europe and US time zones.
In addition to its hedge fund offering, SMTB provides fund admin and accounting services to funds of hedge funds and private equity firms.
Lobler admits the new business faces challenges. "Because the average fund size in Asia is small and competition in our business is fierce, we are prepared to compete on price if necessary."
One example of pricing flexibility is a risk and portfolio management system that SMTB is rolling out to fund managers, with a fee-charging structure based on assets under management. This pricing approach is suitable for smaller hedge fund managers in Asia, with an average fund size of around $75 million.