In The News, Insights

MUFG’s first year under new investor services chief shows benefits of hiring from within

By Jonathan Watkins

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Acquisitions, high-profile hires and a new securities lending offering have been among the highlights of MUFG’s first year under investor services chief John Sergides

In just over a year as permanent CEO of MUFG’s investor services business, John Sergides has hired, acquired and built from the ground-up, with the latest move coming in the form of a new securities finance team to start 2020.

Sergides’ ascent to the helm started in 2015 with the role of global head of sales and marketing, before he assumed the deputy CEO position and was then subsequently appointed as chief executive in January 2019.

Given his experience in the industry, and within MUFG itself, Sergides wasted no time at the start of his tenure, making moves to hire sales experts with geographical and product expertise in burgeoning sectors such as private equity, real estate and mutual fund administration.

His ability to hit the ground running in the role has also seen it acquire both Maitland’s hedge fund administration business and post-trade firm Point Nine, which gave MUFG an all-important FinTech arm.

The fund administration move increased MUFG’s total assets under administration (AUA) to over $600 billion, and marked the firm’s first acquisition in three years.

With an eye on covering the wide spectrum of securities services from fund admin and trustee services to lending, custody and subscription financing, Sergides said he is thankful to have the support of MUFG’s top brass in realising his vision.

“Investment and autonomy are for me the most important things,” Sergides told Global Custodian, when asked about his first year at the helm. “You need to have the right amount of autonomy but with controls as well.

“A lot of these decisions take a lot of patience and you need a long-term view. A lot of firms are boom and bust, but being able to commit to the space is really one of the strengths of a Japanese firm.”

The appointment of Deutsche Bank’s long-serving head of agency securities lending in New York at the start of 2020 gave MUFG’s clients a clear message that the bank was committing to this space. Tim Smollen was appointed as global head of global securities lending solutions and was joined by eight additional hires who will support the growth and development of its securities finance franchise.

The move is intriguing given the headwinds securities lending faces as a global function, with revenues declining 13% to $8.66 billion in 2019, according to research from DataLend, the market data arm of securities finance specialist EquiLend.

Meanwhile, Japan’s Government Pension Investment Fund (GPIF), the world’s largest pension fund, suspended its securities lending programme over transparency issues at the end of 2019,  and the impending rollout of regulations in Europe could undoubtedly have a global impact on activity.

Sergides however, believes it’s the right time to bolster its offering given the fit within its other services and the appetite of clients.

“We’ve been looking at all the products out there, what’s out there, what’s needed, where is there white space, and some is from a geographical perspective and some is from a product perspective,” he said. “Some of the larger players have de-focused on lending, so it’s become a natural partnership with people to grow this space.

“Japanese institutions who were not involved in the space now have a bank they are familiar with to participate.”

On the fund administration side, MUFG made two major acquisitions in 2015 and 2016, through UBS Global Asset Management’s Alternative Fund Services business and Rydex Fund Services respectively.

The Maitland deal, which was announced in October 2019, added only $20 billion in AUA, but much more on the technology capability front. It also gave hedge fund clients of Maitland access to banking and treasury solutions of Mitsubishi UFJ, MUFG’s Japanese parent bank.

“Given our size, you can see that when you add $20 billion that it’s not an AUA play. Maitland gives us an excellent group of people in a specific location and they are innovative because of their size. We can develop cutting edge technology that the industry is not ready for just yet, and develop these solutions with clients that can later be used for the wider industry.”

On any possibly future deals, Sergides pointed out that with the shrinking number of administrators and demand from the buyers in the market to add complimentary services to their offerings, that opportunities may be sparse.

“There’s not that many acquisition targets left,” he explained. “The multiples have nearly doubled so the cost base has doubled. The bigger trend right now is buying the technology stacks around the business.”

Moving forward, Sergides highlights regional expansion in Australia and the Middle-East as geographies with potential, before adding “there’s more hay to be made” across its range of services.

He also places importance on retaining clients, something MUFG prides itself on, particularly in the fund administration space. This is another reason why any future acquisitions will have to be carefully thought out and truly complimentary. The prioritising of client service and keeping customers happy could certainly stem from Sergides experience as a previous head of sales and markets, turned CEO.

“For me the greatest achievement is that we have not lost a client on the fund admin side for a number of years,” he said. “Ultimately, the loss rate shows you listen to your clients.”