TOKYO -- Mitsubishi UFJ Trust and Banking is in the final stages of talks to acquire the fund administration business of European financial giant UBS in a roughly 30 billion yen ($241 million) deal that would lift the Japanese trust bank to No. 7 worldwide.
Fund administration entails calculating asset values and writing reports for investors on behalf of investment funds. Stricter disclosure regulations for hedge funds following the 2008 financial crisis have fueled sharp growth. And monetary easing in developed economies has accelerated inflows of money into hedge funds from investors seeking high returns. Assets in hedge funds have logged 13% annual growth on average since 2009, reaching $2.8 trillion at the end of last year.
Commissions from fund administration are nearly 10 times those from securities custody operations. Switzerland-based UBS' fund administration business operates in nine markets, including New York, London and the Cayman Islands. Administering nearly $140 billion in assets, it ranks No. 12 in the world.
The deal would push up Mitsubishi UFJ Trust's fund administration business from 15th place to seventh, with $260 billion in assets. When equity-method affiliate Morgan Stanley is included, the Japanese trust bank would replace Citigroup as No. 5.
Newly acquired know-how could also help Mitsubishi UFJ Trust offer broader services to individual investors.