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.
BNP notches more wins from NAS
BNP Paribas has apparently stacked a few more NAS wins on top of the MLC “crown jewel”, bringing on board the University of Sydney endowment, as well as Medibank and the $57.1 billion Dexus.
“BNP Paribas has tendered for clients in the NAS portfolio, but at this stage we can’t comment further on specific deal wins,” Daniel Cheever, head of BNP Paribas Securities Services for Australia and New Zealand, said in response to a request for comment from ISN.
The securities services division finished 2023 strongly with its “Stephen Bradbury-style” win of Insignia Financial, which it pulled off after being brought in as a stalking horse to get the cost down in MLC’s negotiations with J.P. Morgan. MLC was looking for a new home as NAB Asset Servicing (NAS) winds down, but J.P. was apparently tripped up by its ongoing issues with its transition from HiPortfolio to a system it calls WINS (a rebranded Sungard InvestOne) and wasn’t able to commit to MLC in a timely fashion, focusing instead on bedding down existing clients.
In that deal BNP already had IOOF; JPMorgan was taking care of some of the ANZ businesses IOOF had picked up (which are also going to BNP); and MLC was formerly the crown jewel of NAS.
BNP currently sits at number six on the Australian Custodial Services Association (ACSA) tables with $434.1 billion in total assets under custody for Australian investors. The Insignia deal should ultimately leapfrog it further up the tables and past NAS (currently in fifth place) upon completion, with some $200 billion of assets expected to come across.
The impact of a deal of similar scale – State Street’s big Australian Retirement Trust win, announced officially in February of last year – was only seen in the most recent ACSA tables, released earlier this month, and it can be expected that this particular measure of market share will look very different by year’s end.
BNP has been one of the biggest winners from NAS’ exit but other custodians are making a strong showing, with State Street recently picking up $80 billion of new business (including UBS Asset Management, sources say) and Citi winning a handful of new clients in Ausbil and wealth managers like Mason Stevens.
