BNY Mellon is to close its beta and transition management arm after deciding that it is not a core part of its business model.
It is a big turnaround decision for the custody bank given that it has provided transition management services to pension funds, sovereign wealth funds, endowments, foundations and other institutional clients since 1983.
“This step is part of a proactive and ongoing refocusing of our strategic priorities within investment services. We want to ensure the optimal use of our resources and expertise as we look to provide the highest level of service to our clients globally,” said a spokesperson for BNY Mellon.
The bank expects to close the business within the next few months. It will look help clients to find and move to a replacement provider for their strategies and positions.
The team of 35 employees will also be affected. BNY Mellon said it would make every effort to deploy them within the bank.
Last June the bank issued a statement claiming that it was expanding its transition management capabilities to serve large investment companies that use outside firms to manage some or all of their investment strategies, such as insurance firms that manage registered 40 Act Funds. BNY Mellon created a registered investment advisor to enable it to provide these services.
Mark Keleher, CEO of BNY Mellon beta and transition management, said in the statement dated June 24 2013: "We're seeing growing demand for transition management services from insurance companies and other financial intermediary complexes that manage 40 Act Funds.”
He added that while regulatory changes were leading many broker-dealer transition managers to quit the business, demand was rising for transition managers that are registered investment advisors.
Last May Credit Suisse closed part of its transition management business, closely followed by a revelation that JPMorgan was shutting its US and UK transition management businesses. ConvergEx also left the sector shortly after.