www.capitafinancial.co.uk

The Future of the Collective Fund Administration Industry
in the UK

Keith Marsden, Chief Executive, Capita Financial Group

Introduction to Capita Financial Group

Capita Financial Group (CFG) is one of the largest managers of collective investment funds in the UK. Our core activity is the provision of collective investment fund administration to a wide range of UK and international clients. CFG is part of Capita Group Plc, a FTSE 100 listed company that is the UK’s market leader in the provision of business process outsourcing (BPO) services.

In addition to the provision of traditional third party administration services, CFG also provides a unique variation to this service, where we perform the role of Authorised Corporate Director (ACD)/Manager to operate the collective investment scheme, taking on the principal regulatory and compliance burden. This removes the necessity for organisations to establish the infrastructure to operate collective investment funds; therefore, allowing the investment manager to focus on the investment performance of the funds.

What is happening in the industry?

There is no doubt that, as with the securities markets, the funds market is embracing the benefits of product globalisation. For example, within the UK under the new COLL regulations, it is now possible to introduce performance fees and exercise the wider use of derivative strategies. Within this backdrop, there is reluctance from Europe’s onshore regulators to permit hedge funds for retail investors. This approach by the regulators is correct, as the hedge fund structures provide strategies from the most defensive to the most aggressive, with little provision to accommodate the understanding of the average retail investor.

However, the life and pension markets are changing and we are now seeing the progression of the wrap products from the early days of PEPs and ISAs to the development of the more sophisticated SIPP (Self Invested Personal Pensions) structures.

A similar approach can be applied to all financial products providing a simple and effective diversification of assets. This change will require institutional collective funds that should include a complete range of investment products, from property and equity to bonds and hedge funds. This broader approach will avoid the lack of diversification experienced in the life and pensions market in the last 10 years. The relevant regulators, however, have to recognise that offering a full range of products in a portable structure is necessary to provide a balanced approach for investors.

Within Capita’s Financial Services Division, we are ideally placed to provide the full range of services to meet the needs of the market. We support a range of blue chip clients across the Collective Investments, Life and Pensions, Child Trust Funds, Corporate and Private Trusts, Self Invested Personal Pensions, Group Pensions and General Insurance markets.

Group Capabilities

Capita Group has a turnover exceeding £1.4 billion and employs 25,000 people, many of whom have joined us from our clients. In 1999, we made the strategic decision to enter the Financial Services market and this sector now accounts for £560 million of our turnover and employs 8,000 staff. It is now the largest business sector of the Group.

Capita is a highly acquisitive Group, and in growing rapidly, has developed a team with extensive experience of systems and site migration, coupled with the ability to deliver high standards of customer service across financial services products.

Capita differentiates itself in the following ways:

• We have demonstrable experience of large-scale business transformation – all of Capita’s large scale BPO contracts demand increased service and reduced costs. Major transformation programmes have consistently achieved these objectives through combining generic corporate business process re-engineering skills with specialist skills appropriate to the business in question. A recent example is the £500 million contract for BBC TV Licensing, which has involved the transfer of 1,500 people, the reduction of nine sites to four, the creation of two new business centres and a major change in processes throughout the call centre, back office and field operations.
• First class client service is inherent in the cultural values of the business, and in the ways in which Capita services its clients. A continued focus on client service excellence is paramount as we continue to grow within the UK and international markets.
• We also believe it is important to maintain constant product innovation to deliver creative solutions to clients across financial services. One example is the provision of the ACD/Manager facility to collective investment funds. This provides investment managers with the opportunity to opt out of regulatory activities in favour of Capita, who will become the manager of the funds, responsible for the administration, compliance and regulatory aspects of the fund. The service also allows for the reduction in the VAT position on such services, and the ability of the investment manager to then focus on their core business of performance of the funds they manage. Capita is one of the fastest growing managers of collective investment schemes in the UK, due to the inherent appeal of this solution.
• Scale – Capita today services eight million Life and Pensions polices and members, and over one million collective accounts. As a “scale” provider in the UK, we can offer immediate financial and operational benefits to our clients.
• Experience of BPO – as the acknowledged leader in Business Process Outsourcing services (Hi Europe 2005 concludes that Capita is three times the size of any competitor), Capita is able to combine advanced understanding of financial services with scale and depth of BPO in general. This offers opportunities for best of breed processing across sectors (for example, optimal use of call centre technology and processes) and the scale across generic processing (for example, imaging and scanning facilities). This ability to capitalise on a range of existing facilities, contracts and skills outside Financial Services will be a key ingredient in creating the most effective service for our clients. It also means that, because of the experience of transferring more than 17,000 staff in the UK under TUPE, the risks involved in transition to working with Capita are minimal.

The growth of Capita’s fund administration capability

Over the past four years, Capita Financial Group has developed into one of the leading fund administration businesses in the market. During this period, the growth of the business has been rapid:

• Funds under administration have risen to £20 billion;
• Number of unit holdings under administration have grown to 1.2 million;
• Number of investment managers we provide collective fund services to have increased to 103;
• Offices now range from London and Leeds in the UK to Jersey, Dublin, and Mumbai with further expansion plans for Luxembourg in the near future;
• CFG administer approximately 20 per cent of authorised UK market funds in addition to offshore services.

In the fund administration market, Capita’s business continues to expand ensuring further economies. Our target is to be in the top two in the UK market within two years. In this respect, CFG anticipates administering at least three million unit holdings within this time period.

Plans for the future

To ensure that CFG continues to offer our clients an excellent service, investment this year in further operational capacity has been higher than ever before, especially in the UK. However, capacity growth has also been created in Capita’s first-class Mumbai off-shoring centre, with investment also continuing to improve the technology solutions that support the business, and ensuring investment in staff continues at all levels. In addition, CFG continues to increase the value of the service we can provide to clients by increasing our international presence and developing the range of products that we offer.

From the day that Capita started to provide collective investment fund services, our infrastructure has been constantly enhanced and service capability increased to anticipate the needs of the rapidly changing financial services markets. CFG has established a sound base to play a key role in the overall range of financial services provided by Capita Group.

Capita Financial Group Ltd
Beaufort House
15 St Botolph Street
London EC3A 7HH

www.capitafinancial.co.uk

 

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