Brown Brothers Harriman (BBH) is a unique entity in the financial world. The company is privately owned by its 36 partners who are based in, Luxembourg, London, Dublin and Tokyo, with the remainder in the US.
The firm offers three business lines: asset management, private banking and investor services. Fund administration sits within the Investor Services line of business, which, together with other services (global custody, foreign exchange, securities lending, etc.) represents 80 percent of the firm's business.
Andrew Craswell (pictured), Investor Services – European ETF Business Development at the firm, explains that BBH has specialised in servicing sophisticated asset gatherers who value a long term partner focused on helping them navigate complexity, while growing and differentiating their business. BBH provides custody and administration services to more than USD300 billion in ETF assets globally across many asset classes and strategies.
Brown Brothers Harriman's ETF fund administration business started in the US and expanded into Europe four years ago when the firm worked with a major global asset manager to bring their first European ETFs to market. BBH's European footprint has since expanded significantly, and globally, since launching ETFs with 25 leading asset managers.
"What we are trying to do as a custodian and fund administrator is work with the next group of ETF issuers who are coming to the market," Craswell says.
"We work with existing firms with established ETF businesses, but we are seeing tremendous interest from groups who are interested in joining the ETF market, including some major blue chip names."
The firm differentiates itself by taking a consultative approach to client service and focuses on asset managers who are looking to launch ETFs.
"We have a holistic approach to the market," Craswell says. "We touch on every party in the ETF ecosystem from authorised participants to law firms to stock exchanges. We can help assess what launching an ETF product might mean to your business, how it will impact on your existing business and what are the cost considerations and what does it mean for my existing infrastructure."
Craswell notes that there are many different variations in the ETF world. "Core indices tracking are done by those firms with scale, but the space where we see asset managers looking is in the smart beta or multi factor area with an ETF wrapper. It means that as an asset manager you can still implement some of your Intellectual Property and charge a premium price. Smart beta is the middle ground between pure beta core indices and active management."
Brown Brothers Harriman combines their consultative approach with four elements that are key to supporting new entrants into the ETF market: enabling growth; brand protection; transparency and future proofing.
"These are the four pillars around which we have built our ETF business," Craswell says.
The idea of "future proofing" relates to BBH's belief that the future success of the firm's clients is supported by investment in technology and product innovation – some 70 percent of BBH's annual technology spend goes into technology development.
"When you are appointing a fund administrator/custodian, you need to be able to look five years down the line and ask `can they continue to support us'?" The firm has been focusing on areas of the ETF markets such as currency hedged ETFs, supporting ETF share classes and also Hong Kong domiciled ETFs for global issuers.
Disclaimer: The views expressed are as of 16 February, 2016 and are a general guide to the views of Brown Brothers Harriman ("BBH"). The opinions expressed are a reflection of BBH's best judgment at the time this interview was conducted and any obligation to update or alter our views as a result of new information, future events, or otherwise is disclaimed. Furthermore, these views are not intended to predict or guarantee the future performance of any individual security, asset class or markets generally. IS-2016-02-17-1591