(Pictured: Byram Johnston)
The normally sleepy world of fund administration and registry has generated an air of excitement in the past few months. Well, perhaps not excitement. But the corporate activity in the field is at least attracting some press for the first time in years. For Byram Johnston and Martin Smith, the new level of interest is vindication of 10 years of hard work and, sometimes, exasperation.
The two former Arthur Andersen senior consultants started MainstreamBPO – the largest independent provider of the full range of fund registry, pricing, accounting and administration – in 2006. However, their story actually started a few years earlier. With the purchase of Computershare’s unit registry business by OneVue (see separate report this edition) it deserves retelling.
When they decided to leave Andersen in 2003, after working together on some major backoffice consulting contracts previously, Johnston and Smith decided to go into outsourcing as operators. Financial services seemed the right one for the “lift and shift” model which they had developed at Andersen.
They found the systems provider Garradin, which was owned by the listed Powerlan Ltd, and agreed to a deal, which they were to regret, whereby Powerlan became the majority shareholder and provided the required technology to get started.
Their first “lift and shift” coincided with the establishment of the new business, affording positive cashflow from day one. This was the backoffice of the State Trustee of Victoria, which had 45 staff performing fund administration and accounting, as well unit registry and pricing. They had made the decision to exit those tasks and were happy for the start-up Financial BPO, as it was then called, to perform the work provided the staff were looked after.
Financial BPO moved into offices in Melbourne and Johnston was invited onto the Powerlan board, where he became chairman.
“We tapped into some good business with this model,” Johnston says. “It was working very well. But after 22 months, in late 2006, Powerlan decided to sell it and Computershare bought it.”
Powerlan had been a darling of the dot-com boom a few years earlier but had overstretched itself and was suffering in the subsequent bust. The company also sold Garradin a few months later, to Bravura Solutions, and was itself taken over in 2010.
Johnston and Smith also sold their interests in Financial BPO as part of the Powerlan deal with Computershare and, unrestrained by any non-compete agreements, started all over again back in Sydney.
They did a new technology deal with DST International for their second start-up in three years – MainstreamBPO – but this time kept control of the company’s ownership.
They observed that the proliferation of boutique fund managers at the time were having difficulty getting the big securities services companies to do their administration and associated backoffice functions. So they went after that market and won the business of funds managers such as Magellan Financial Group, which enjoyed exponential growth.
The growth for MainstreamBPO was also helped by the registry companies narrowing the range of their offering by dropping unit pricing and fund accounting, concentrating on the unit registry part which was the best fit with listed registry business.
MainstreamBPO went the other way, widening its offering to cover not only funds administrators but also superannuation admin (through the purchase of Group Benefits) and expand registry to include an ASX listed share registry business which enables it to handle ETFs.
Last year it won the tender to take out Perpetual Trust’s client registry in another “lift and shift” agreement and this year it did a “lift and shift” of the Hunter Hall backoffice. The company also expanded offshore by opening an office in Singapore, which Martin Smith is currently running.
When news broke early this year that Computershare was to make an orderly exit of its unit registry business, MainstreamBPO threw its hat in the ring as a potential – and one would have thought obvious – purchaser. The offer to discuss the prospect was rebuffed by Computershare.
Johnston and Smith are now thinking of their next avenue of expansion. “I wouldn’t be surprised if we moved into mortgage administration before too long,” Johnston says.