Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Comito to go as MLC looks for a new home
NAB Asset Servicing (NAS) head John Comito is set to retire on August 16 as Australia’s last domestically-owned custodian winds down its operations and one of its largest clients looks for a new home. Comito was appointed to run NAS in 2016, taking over from acting head David Knights. At the time, NAS held the number one spot in the Australian Custodial Services Association rankings; it has since crept down to number five in both master and sub custody as clients deserted it during a well-chronicled on again, off again sales process.
In announcing Comito’s retirement, NAB group executive, corporate & institutional banking (C&IB) David Gall thanked Comito for his 30 years of “dedication and expertise” and listed key milestones across both the C&IB division and the bank more broadly.
“John now leaves NAB, three decades on, with so much to be proud of,” Gall wrote. “He has set a high bar for our client service standards and has made a lasting impression on many as a role model for our culture and values and as mentor to colleagues at all levels.”
Meanwhile MLC, a cornerstone NAS client even through its sale to Insignia (the rebranded IOOF), is shortly expected to make a decision about its own future. The assumed frontrunner for the business has historically been J.P. Morgan, which holds other parts of the amalgamated Insignia, though problems migrating super fund clients to a new accounting platform it calls WINS – Sungard InvestOne by a different name – from HiPortfolio are thought to have made it into a more open competition. J.P. Morgan has apparently had some difficulty getting tax right for super funds, while the transition of asset management clients has gone more smoothly.
The beginning of NAS’ current woes can be roughly traced back to 2014, when it was formally announced to the ASX as being ‘for sale’ in a move then-editor Greg Bright accurately predicted would have a deleterious effect on its ability to win new business, though it was already experiencing a slow bleed of mandates prior to the announcement that it would seek a new “partnership” for the custody business.
NAB ultimately ‘recommitted’ to custody, but clients were spooked; UniSuper, TWU and First Super took their business to BNP Paribas in 2015, while VFMC went to State Street and Mercer Super Trust to Northern Trust. Since then it’s only had a handful of wins, including for the Australian National University’s $1.3 billion endowment and the $20 billion Brighter Super in 2021, which was the biggest contested super contract won under Comito’s tenure. It also retained Suncorp after the insurer suspended its transition to BNP Paribas in 2019.
At the time of the 2014 sales announcement outsiders estimated that NAS was turning a gross profit of about $150 million a year out of its custody business, and it was later rumoured to have knocked back an offer as high as $1 billion from State Street. A sticking point in multiple attempts to purchase NAS has been NAB’s desire to hang on to the money spinning cash and FX parts of the business, which no prospective buyer could afford to walk away from. HSBC was one of the most recent potential takers, with rumours circulating in March 2022 that it was looking to acquire NAS’ 30 largest clients. The deal, like many others, ultimately fell through.
