Following State Street's recent acquisition of the Bank of Scotland's $13bn ($22bn) unit trust business, the custodian is planning to corner the UK open ended investment company (OEIC) administration market - an area of potentially considerable expense for fund managers who are currently offering a one stop shop.

In general their core business is investment management," says Peter Christmas, vice president at State Street in London, "Our core business is administration therefore we would say that we could offer probably a more cost effective service, we can offer clients a more consistent service in terms of guaranteeing getting the pricing out because of the robustness of systems."

State Street is currently looking into the systems question in terms of the most efficient method of transferring the unit trusts over and is planning to offer administration services and transfer agency (TA) "simultaneously" for both OEICs and unit trusts. The TA will be managed by European Financial Data Services, a company jointly owned by State Street and DST in the US.

Technology will be an area of necessary investment for fund managers come the move to OEICs and with $379bn under management, State Street will be looking to take advantage of its economies of scale to take the matter out of fund managers' hands, says Christmas. "I think a lot of fund managers will be having systems issues anyway with view to the year 200, EMU, with the whole conversion to OEICs, which requires some systems investment. What we will be saying to them is that we can helpthem effectively immunise themselves from some of those effects."

State Street will be waiting to see how the UK market develops before expanding its services into Europe. So it will not be following in the footsteps of European Fund Administration in Luxembourg and Credit Agricolle Indosuez and Generale de Banque's Fastnet venture in Belgium- yet.

"On the pension fund side we have seen some growth on the unathorised exempt unit trusts through pension funds investing in those, as opposed to separate accounts and we would expect to see that continue to expand under OEICs. But even the move to OEICs at the moment, it's still early days and there isn't a perceptible shift in the market - there is still a number of people waiting to see what happens," says Christmas on the UK situation.

But Europe will most likely be the next logical step once the venture is up and running in Edinburgh. Says Ronald Logue, executive vice president responsible for State Street's mutual fund business services in the US. "To the extent that the market develops we will certainly be interested in doing that""

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