Trustees Executors (TE) fund administration business hangs in the balance this week with its biggest client currently weighing up replacement providers.
Bruce McLachlan, Fisher Funds chief, confirmed the $7 billion plus manager was reviewing its fund accounting and custody service putting long-time incumbent, TE, under pressure.
“We expect to make a decision on this over the next month or so,” McLachlan said. “This process has not been driven by any dissatisfaction with TE. We have an obligation to our clients that these services are the best available and for good value and we have not gone to market for some time. We are committed to run a professional process to ensure we get the best outcome.”
Last March Fisher officially appointed TE as registry provider across all its funds in a role previously split with Mercer.
However, in 2015 the-then Fisher general manager, Glenn Ashwell, hinted that the more lucrative fund accounting and custody contract would also face review down the track.
Ashwell resigned from Fisher this July ahead of TSB Community Trust’s buy-out (along with US private equity firm TA Associates) of the Takapuna-based manager last month.
It is understood a raft of other NZ fund administration contracts are also in play including the fund registry component of the $4 billion Milford Asset Management, currently performed by TE. In 2014 Milford appointed Auckland-based administration firm MMC for fund accounting duties while retaining TE as registrar.
As well as Milford, both Westpac-owned manager BTNZ and ASB, which use TE for some fund administration services were understood to be sounding out the back-office market for options.
A Westpac spokesperson said: “BTNZ regularly undertakes reviews across its entire business. Any and all negotiations are confidential.”
TE operates three units: private wealth; a corporate trust arm, and; the third-party investment administration business, which generates the most revenue.
The NZ trustee firmly has famously been offered for sale several times in the last few years, most recently late in 2014 when a reported offer of about $80 million from Australian suitors was rejected. It is understood at least one Australian party has more recently been doing due diligence on the TE business.
The trustee firm has been through various incarnations during its 135-year plus history, most-recently under the ownership of Sterling Grace, headed by Swiss-based investor John Grace. TE director, Andrew Easson Scott-Howman, is listed as the sole nominee shareholder of Sterling Grace (NZ), which features only John Grace and TE chief, Rob Russell, as directors.
According to the latest TE financial statements, the Wellington-headquartered trustee business reported an after-tax profit of about $4 million on revenue of just under $38.4 million for the 12 months to September 30. In the previous year, TE recorded a profit after tax of almost $8.4 million on revenue close to $36.5 million.
The Sterling Grace NZ accounts for the same period (which mostly mirror the TE figures) show the international parent lent over NZ$18 million (10 million Euros) to subsidiary engineering firm Sonnek Holdings. Sonnek repaid the principal in October 2015 with interest outstanding as at September 30 last year.
TE was not available for comment.