Federated Investors predicts in increase in the number of smaller mutual funds that outsource their back-office administrative needs to larger complexes, Reuters reports
Federated President J. Christopher Donahue is basing this assumption, in part, on the forthcoming wave of new compliance regulations issued by the Securities and Exchange Commission.
The next significant regulatory hurdle for mutual fund companies is to install a compliance officer and implement oversight programs that meet new standards by Oct. 5. Many smaller companies are expected to chafe at the expenses of these new demands.
Federated offers some types of administrative outsourcing services and hopes the new regulations will lead to a windfall of new business in this area.
Federated also expects smaller fund complexes to turn to larger outfits to manage their funds. For example, due in part to rising administrative costs, Citizens Banking Corp. solidified plans to restructure its Golden Oak mutual funds into new investment vehicles maintained by Federated and Goldman Sachs. The new arrangement gives Citizens funds added distribution reach through Federated and Goldman Sachs' networks and provides a discount in administrative expenses.