T. Rowe Price Group announced Tuesday it would outsource 220 mutual fund accounting and record-keeping jobs to New York City-based financial firm BNY Mellon this summer.
The Baltimore-based money management firm said the employees would be laid off, then hired by BNY Mellon. The change will take place in August.
About 200 of the affected employees work out of Price's Owings Mills campus, while the others are in London and Hong Kong. There will be a two-year transition period during which the workers can continue to work at Owings Mills, but a Price spokesman said that after that time, they will eventually shift to BNY Mellon offices. The closest BNY Mellon office is now in Wilmington, Del.
"We're always assessing the best ways to meet the needs of our clients and the firm," said Brian Lewbart, the spokesman. "They have the scale and expertise to take on these functions. We're also putting into place a relationship with an organization that shares our values and has shown a commitment of valuing our associates and their expertise — that was important from our standpoint. It's a firm we feel very comfortable and confident in."
Lewbart said the company started on the path to outsourcing while seeking to replace outdated technology.
BNY Mellon is a much larger financial organization than Price. BNY Mellon had about $1.7 trillion in assets under management and another $28.5 trillion under custody or administration as of March 31, making it the largest custodian bank in the world, while Price had $772.7 billion in assets under management.
Samir Pandiri, BNY Mellon's global CEO of asset servicing, called the agreement "a historic milestone."
"Our ability to support them on our state-of-the-art platform is key to our new relationship, and we look forward to continuing to grow as they grow their own business and to supporting them in achieving their strategic goals," he said in a statement.
Outsourcing by money management firms can cut costs by 20 percent to 30 percent over three to five years, according to a study by Celent, an international financial research and consulting firm.
Karyl Leggio, a finance professor at Loyola University Maryland's Sellinger School of Business, said she wasn't surprised by the move.
"I think it's been coming for a while," she said. "I think there's life cycles for companies, there's time periods where companies try to do everything themselves, and there's times when companies try to focus on their core competencies. There was a time when all IT was outsourced to India."
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Leggio said she thought it was a "pretty good business move" that took the affected employees into account. "There's some time for employees to make other plans if they want to move," she said.
Despite the outsourcing of some Baltimore-area jobs, Lewbart said Price remains "deeply committed" to the region, citing plans to hire 330 new employees in the area this year. The company employs more than 4,000 people in the region.
Lewbart said the employees to be outsourced, some of whom price securities or calculate the net asset values of mutual funds, would have comparable salaries at BNY Mellon. He declined to comment on whether any employees not hired by BNY Mellon would receive severance packages. But both companies have said all the affected employees are expected to be hired by BNY Mellon.
Price could outsource other jobs in the future if it's deemed necessary, but is not planning on a large-scale review of whether more jobs need to be outsourced, Lewbart said.
Shares in Price closed down 54 cents at $80.27 each on Tuesday.