Outsourcer names ex-CheckFree exec J. Mrak as new WealthSolutions director. New York-based Bisys has put Joseph Mrak in charge of WealthSolutions, a processing provider for separately managed account (SMA) managers and sponsors within its Fund Services division.

"Joe is an innovator and thought-leader of the SMA sector, and he will prove instrumental in positioning Bisys as the best-in-class provider of outsourced managed account solutions," says Bisys Fund Services president Fred Naddaff. "We envision significant growth potential for WealthSolutions and look forward to the many positive contributions Joe is poised to bring to our wealth management clients and prospects."

Demand

In addition to Bisys, Citigroup, SEI, State Street, JPMorgan Chase, PFPC and Mellon provide SMA processing. The Bank of New York had been a provider but it threw in the towel last year -- now though its plan to acquire Mellon raises the possibility of its re-entering the fray.

By SEI's reckoning, 85 of the top 100 SMA managers are still up for grabs along with a slew of smaller managers in addition to fund-company neophytes and absolute de novos anxious to hitch a ride on the SMA bandwagon.

"As fees become more compressed and products and technology grow in complexity, the SMA market is following the natural progression toward outsourcing," says Mrak.

In fact outsourcing makes sense. Because retail SMAs are generally a lot smaller than institutional accounts, managers need more of them to achieve profitability. And more accounts mean more initiation, more customization, more reconciliation, more performance analysis and more reporting. In addition, managers are seeing fees squeezed as dominant sponsors like Merrill Lynch and Smith Barney look to reduce their own SMA costs in the wake of expensive platform renovations. Meanwhile, the industry as a whole is growing, forcing more managers to confront critical mass in their back and middle offices. One industry projection has SMA assets growing from around $600 billion at the end of 2004 to about $2 trillion by 2011.

Supply

For all that though, most observers figure there's only room for two, maybe three, process providers in the SMA space. And if that's so, Bisys has some catching up to do.

Events of the last two years or so suggest that SEI and Citigroup have pulled away from the pack. SEI can point to strong deal flow and the extra bragging rights of winning business from at least two managers who had been using other outsourcers. Citigroup has half a dozen publicized wins to its credit since getting into the business in March 2005 -- including Lazard's top-20 SMA program.

JPMorgan, another late entrant, has had a decent run of four or five wins over the past 18 months or so, making it a strong contender for third place.

State Street said in 2004 that it would stop funding its SMA outsourcing business, but it still seems to be chugging along. PFPC has two or three clients. If BISYS has any at all, they're in stealth mode.

Mrak comes to Bisys from Security APL provider checkfree-cis.com CheckFree Investment Services, where he was a v.p. for product development. Before that he was chief technology officer at overlay manager Placemark Investments, which he helped to found.

A few months ago Bisys Fund Services got into trouble with the Securities and Exchange Commission for having "aided and abetted over two dozen mutual fund advisers in defrauding fund investors," as the government regulator put it in a 24 September 2006 press release. -FWR

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