Bny makes bid for private banking business

As hedge funds extend into the broader marketplace, the Bank of New York is seeing its client based broaden away from pension funds and insurance companies to include private banks looking to create their own fund of funds. “Instead of the individual hedge fund managers, our client is also the distributor – the private bank,” says Mr Aldrich. “And like institutional investors, private banks are often wanting to replace bond-like returns, that is between 7 and 9 per cent, as well as looking to create the right mix of risk/return plus volatility and diversification within their fund and so we are seeing a lot more assets flowing in. On a basic level that creates more service opportunities and it also means a change in client base.” Indeed, the evolution of the relationship between private banks and the custodian bank is one big trend that Mr Aldrich has earmarked. “Private banks will have more of a relationship with their service providers and asset managers, locked in a battle of the survival of the fittest, will look to their service providers to provide even more support.” The bank set up in Dublin in 1994 and started dealing with hedge funds the year after that so it is not a new player in the alternatives world. This, thinks Mr Aldrich, gives it the cutting edge in that it has had the time to evolve rather than simply acquiring the alternative fund services arms of other players. “We differentiate on strength, depth and experience and consider that for some other groups, hedge funds are an add on, whereas for us they form part of our core offering.” Another big trend for Mr Aldrich is the move from traditionally self-administered US managers to outsourcing – alongside European managers continuing to shed as much back and middle office function as possible. In the wake of this activity in initial outsourcing, he sees no great moves towards greater regulation. “Regulation can create more headaches for the bank in terms of compliance with different national regulators and fiscal authorities.” He explains that this far, the bank has tried to operate on a critical mass basis and to an extent it’s easier to standardise procedures in an unregulated environment.