Bigger isn’t always better when it comes to member services. Megafunds might be able to mass customise, but when you’ve got two million members it’s tough to bring the personal touch.
The famous and closely watched US endowment model took a hit in FY23, with smaller, equity-heavy investors taking the lead. But the longer-term superiority of a chunkier exposure to alternatives remains unchallenged.
Citi wins landmark contract with HostPlus
Citi has won its first industry super fund, HostPlus, for full-service master custody in a deal which is likely to change the competitive landscape for securities services in Australia.
The new arrangement, after a year-long assessment process which involved the AUD$12 billion fund’s most senior executives and three international fact-finding missions, is expected to be announced this week.
It is understood that the widely anticipated new contract, replacing that of incumbent JP Morgan, was signed last week.
Sources said that the new contract involves improved information flows and new technologies for their delivery to both the fund administration and for members. It is also understood that Citi has provided an upfront financial incentive akin to property owners’ “rent-free” offers.
The major significance for the market, however, is that this represents Citi’s first independently acquired super fund client, outside its previous core business relationship with Commonwealth Bank and its associated Colonial Group. Citi has been the long-time custodian for Colonial and also, more recently, the AUD$5 billion Commonwealth Group Super Fund (for bank staff). It also has provided custody for fund managers, such as Dimensional Fund Advisors.
Of the international custodian banks with significant presences in Australia, State Street, JP Morgan, BNP Paribas, Northern Trust and now Citi provide a full-service offering independent of others. HSBC remains the largest domestic custodian, thanks to its purchase of Westpac’s custody business a few years ago and strong links to incoming business from Asia. NAB remains the biggest custodian of Australian-sourced assets and retains its international offering through BNY Mellon.
In a market where the number of potential clients is shrinking, although their asset bases are growing exponentially, the successful entry of a new big player is bound to put pressure on all participants.
