A new report “from the coalface” of super fund investing has gone some way to quantifying the cost of shonky investment management, with members potentially losing out on hundreds of thousands of dollars.
Surging equity markets have driven the Future Fund’s return higher, but its prediction that inflation will be stickier than expected has been born out and it “remains conscious of the potential for significant deterioration”.
State of the ART: How State Street won its big new mandate
In late 2022, State Street was selected to provide custodial, investment administration and data management services to the $230 billion Australian Retirement Trust (ART), which was born from the merger of QSuper and Sunsuper. QSuper’s custodian at the merger was Northern Trust. The “short of it”, according to State Street Australia country head Tim Helyar (picture at top), was that they were able to convince the merged organisation that they had total alignment on strategic priorities.
“A lot of that was about scale; a lot of that was about capability, particularly around data; a lot of that was about the commercial proposition that underpinned all of that,” Helyar said on Wednesday (February 8). “But they felt that we understood them as an organisation.”
The history helped; State Street administered QSuper and Sunsuper at separate times (they lost the QSuper business to Northern Trust in 2018 following a review by then-head of investment operations Matthew Heeney, after originally winning the business from NAB Asset Servicing (NAS) in 2012) meaning the merged fund “knew (State Street) as an organisation and they knew what we were capable of doing”. But it was also about the vast experience that State Street had accumulated doing successor fund transfers (SFTs) for Sunsuper.
“One of the things we were able to prove as well, throughout the due diligence and the request for proposal (RFP), was the experience we’ve had with complex change with Sunsuper,” Helyar said. “By its nature, Sunsuper had a lot more change over time. We’d done close to 20 SFTs into Sunsuper. We managed all of those seamlessly. That ability to manage change – which is aligned to the way they want to move forward as well, QSuper/Sunsuper itself was an enormous SFT – we were able to demonstrate over time that we could handle the change, and I think that was really important.”
Institutional investors are “challenged by the depth and breadth of data available to them” said Mostapha Tahiri, State Street’s head of APAC, and State Street will be expanding its support for ART to data management and analytics across public and private markets – allowing ART to “collect, curate and validate data so they can make better informed decisions”.
“Globally, we support the largest, most sophisticated pension funds in the world. There’s a huge amount of experience in managing these needs,” Tahiri said. “If you bring it back to superannuation in Australia, it’s a very interesting domain and focus for us as an organisation. We’ve put a lot of effort into understanding the industry here: if you look at ART today, their strategic priorities are twofold: getting global investment capabilities across different asset classes and geographies… and they’re going through a huge transformation to give back to their members.
While superannuation mergers are the obvious source of upheaval in Australia’s custody industry, NAB Asset Servicing’s (NAS) decision to wind down its operations amidst “an ongoing strategic review” by its parent is also shaking up the market.
“It makes (the custody market) more concentrated; there’s a flurry of activity right now, as legacy NAS clients look for a new provider,” Helyar said. “They’ve been given a timeframe and you don’t want to be the last one standing. That brings risk. There’s a real race at the moment and we’re already seeing the RFPs coming through. And there is a lot of activity around some of the bigger names… there will be a lot of competition for the remaining names.”
Underpinning State Street’s continued play for the big end of town in Australia is Alpha, its front-to-back administration platform, which was born out of the global business’ acquisition of Charles River Development. State Street currently has 19 clients globally using the full suite; ART itself will be plugged into the Alpha data platform, and State Street has a handful of prospects in Australia and a host of other businesses using its separate modules.
“We’re very well advanced in terms of the implementation for one of our asset owner clients, across Charles River, middle-office and data,” Helyar said. “Beyond that, we’ve got a lot of great traction around the Alpha data platform – we’ve signed multiple clients over the last six months around leveraging our core data platform capabilities and embedding that as a centrepiece of our clients’ operating models and feeding that data into their trading systems and risk, analytics and reporting.”
