SMTB-Daiwa deal to bring fund-servicing synergies

Sumitomo Mitsui Trust Bank’s move to buy Daiwa Securities’ hedge-fund administration and trustee business is expected to enable the division to tap a wider client base.

The deal would see Daiwa’s global asset services division, under new parent SMTB, seek to target clients in Japan with offshore services such as Luxembourg Ucits fund admin, says Joost Lobler, Asia ex-Japan head of sales for global asset services at Daiwa Capital Markets Hong Kong.

(SMTB last week agreed to acquire two subsidiaries of Daiwa incorporated in the UK and Ireland that form its global asset services unit. However, Daiwa Securities has kept its US custodian business.)

SMTB is an established presence in the hedge-fund space, having invested in firms such as NewSmith Capital Partners and FRM in recent years. This means the bank will continue to expand the business, which has $51.58 billion in assets under management, says Lobler. 

“Sumitomo is a shareholder of hedge funds, and we are also servicing one of the hedge funds that is managed by a subsidiary of Sumitomo Mitsui Trust Bank,” he notes. “They understand the business we are in and how the hedge-fund sector operates. Such understanding really helps support our future growth, as they are investing into a market that they themselves are involved in.”

Daiwa’s global asset services business has about 200 staff globally, and in Asia has a representative office in Hong Kong. The ¥3 billion ($37.5 million) sale represents the firm’s latest move to dispose of non-core businesses, after the sale of its prime-broking business last year to Bank of Nova Scotia.

SMTB also has a trust business, but it is limited to serving onshore funds, mainly investment trusts that are domiciled locally in Japan. After the sale, the global asset services division will continue to service Daiwa Securities’ offshore funds business.

According to a notice published on SMTB’s website, Daiwa’s global asset services division recorded net income of ¥61 million on ¥634 million in sales for its UK subsidiary as of March, while the Irish subsidiary posted a net loss of ¥29 million on sales of ¥1.6 billion over the same period. The Irish division had a bigger net loss of ¥115 million a year ago.

The deal is awaiting regulatory approvals.