By Thomas Coyle
DOW JONES NEWSWIRES
Third-party investment-platform provider FundQuest, a subsidiary
of BNP Paribas Investment Partners, has agreed to outsource the
bulk of its technology and back-office operations to Envestnet
Asset Management, Inc.
"This agreement will give FundQuest the opportunity to leverage
both the capabilities and scale of Envestnet's technology platform
as we continue growing our integrated and customized advisory
product solutions," James Fox, FundQuest's chief executive, says in
a press release issued jointly Tuesday by FundQuest and Envestnet.
"We will now have increased flexibility to develop additional
investment products, introduce new investment solutions to the U.S.
marketplace and leverage the vast resources of BNP Paribas
Investment Partners."
FundQuest declined to elaborate on the agreement with Envestnet.
But a source close to the firm says it amounts to FundQuest
shedding a "substantial amount" of an in-house technology
infrastructure built up since its inception in the early 1990s in
favor of Envestnet's capabilities around account initiation,
trading and reconciliation, custodial data processing and
performance reporting in addition help creating – as the press
release puts it - "innovative investment solutions."
The move highlights the transformation of Envestnet from a
direct rival to firms like FundQuest and Brinker Capital, which
sponsor third-party manager platforms used by independent
broker-dealers, to a technology and operations provider to such
sponsors.
"Envestnet has become to be an outsourcer more for sponsors than
on the money-manager side," says Bevin Crodian, chief executive of
Edison, N.J.-based Market Street Advisors, a firm that provides
investment-processing services to asset managers and program
sponsors. "It's where a lot of these guys are going – [Pershing
LLC's] Lockwood Advisors, [PNC's (PNC)] Advisorport and Genworth
[Financial's (GNW) Wealth Management] – but [Envestnet] is really
the biggest player in the space."
As Crodian tells it, fee-based investment platform sponsors are
outsourcing back office functions while keeping their hands in
areas where they think they add value – proposal generation and
product selection - in a bid to trim overhead.
"If you can knock five or 10 basis points off the cost of
running these platforms, then you're not talking trivial numbers,"
says Crodian.
Including assets under management, administration and licensing
agreement, Chicago-based Envestnet had around $89 billion in assets
at the end of 2009.
FundQuest, which is based in Boston, has $40 billion in assets
under management in the U.S. and Europe.
-By Thomas Coyle; Dow Jones Newswires; 207-631-4235;
thomas.coyle@dowjones.com