The $18 billion plus Westpac-owned funds management group BTNZ is to in-source registry function in a rare administrative move.
BTNZ chief, Nigel Jackson, said the manager opted to internalise registry following a review of the “operating model and an extensive RFP process”.
“We’re keen to deliver the best possible experiences for our customers and believe bringing these services in-house will make our operations more efficient, helping BTNZ to deliver even greater value and service levels,” Jackson said.
Currently, Westpac contracts registry under a ‘bureau’ agreement with Trustees Executors (TE), operating on the Bravura Sonata system held under licence by the bank.
But it will likely take some time to re-home the outsourced administrative services.
“We are in the planning stages of this work but anticipate the transition of services back to BTNZ will take at least 12 months,” Jackson said.
Many larger institutions with funds management operations maintain internal administration services while stand-alone boutique firms typically outsource such functions.
The decision to in-house or outsource funds administration may also carry a tax consequence under a long-running – and recently restated – GST anomaly.
Under an Inland Revenue Department (IRD) draft ruling published last year, managed funds would not be subject to GST while outsourced administration services would incur the sales tax.
Legal firm MinterEllisonRuddWatts noted that “managers and administrators of both retail and wholesale managed investment schemes will need to consider how this draft interpretation statement impacts their structure, as outsourcing to third-party investment managers and administrators could carry GST costs that will not be recoverable”.
“Entities providing investment management services to managed funds will need to consider whether their services are subject to GST.”
The IRD has yet to issue a final determination on the vexed and ancient funds GST issue.
Current practice centres on a long-standing ad hoc industry agreement to apply GST to 10 per cent of fund fees – although an earlier IRD decision enabled firms to tack on the sales tax to any proportion of unit trust fees if they could argue the case.
Meanwhile, BTNZ reported a net profit after tax of $6.8 million for the 12 months to September 30 last year ($6.1 million in the 2023 financial period) on income of $48 million and operating costs of $38.6 million (compare to $42.3 million and $33.7 million for the previous 12-month period).
The bank-owned manager runs investments for various Westpac funds including the more than $10 billion KiwiSaver scheme.
TE retains several registry clients including Harbour Asset Management. The Wellington-based firm has exited two business lines last including wealth advisory (sold to Perpetual Guardian) as well as the unit-pricing and funds accounting units picked up by Apex Group.
The 144 year-old TE remains a key player in the licensed supervisor market.