PFPC Gains Muscle with Acquisition
February 21, 2000
PFPC, the investment servicing subsidiary of PNC Bank Corp. of Pittsburgh, is poised for global growth, having completed the acquisition of First Data Investor Services Group., according to James Fox, vice chairman of PFPC.
PNC Bank Corp. completed the acquisition of First Data's Investor Services Group, the mutual fund servicing subsidiary of First Data Corp. of Westborough, Mass., late last year. The addition of ISG established PFPC as the largest full-service mutual fund transfer agent while significantly strengthening PFPC's position as a provider of mutual fund accounting services. The combined companies service a total of 33 million shareholder accounts, including 14 million full services accounts and 19 million on a remote basis as of March, 1999, according to PFPC. Its closest competitor, Boston Financial Services of Quincy, Mass., serviced 11.5 million on a full-service basis. Bolstering its position as the second largest fund accounting firm behind State Street Corp., PFPC grew from $212 billion in mutual fund assets to $287 billion with the acquisition.
The two companies were perfect matches for each other, said Fox, in a recent telephone interview.
"The scope of what we do, the scale of what we do, and the technology of what we bring to bear is really strengthened by the combination of the two companies," he said. "We are now a company 5,000 strong, $600 million in revenue, and both companies have historically grown 20 percent a year."
PFPC thought the two businesses complemented each other because there was very little overlap between them. ISG had a large transfer agent business while PFPC had a large fund accounting business.
PFPC's clients benefit from the acquisition because they have access to a broader range of services, Fox said.
"From an ISG standpoint, they were not in the custody business," said Fox. "Now as PFPC, they can offer custody services to their clients. PFPC can now offer very significant print, mail and distribution capabilities as well as 401(k) record keeping services that were not available before the acquisition."
The combination also means PFPC can deliver service to all segments of the market, Fox said.
"We have the ability to service smaller clients because of what we have been able to do in our distribution arena," he said. "We have the technology to be able to deliver those services through multiple channels including financial planners, broker dealers, and direct marketers." Prior to the acquisition, PFPC had no printing or mailing capabilities.
Over the next year, PFPC will explore a variety of international markets, according to Fox. In 1993, PFPC established PFPC International Ltd., based in Dublin, Ireland. This has enabled the company to provide services to funds around the world.
Fox declined to say specifically what countries PFPC expected to focus on building its international business.
But, one area in particular in which there is opportunity is in international defined contribution record keeping services as many countries move towards privatizing their pension plans, he said.
While PFPC has its eye on global growth, Fox acknowledged that PFPC is not the largest full service fund accounting or custody service provider. But, the company's goal is not to be the largest provider but the best, he said.