Some members are excited for retirement, while others approach it with a “real sense of shame and fear”. Funds are going to have to figure out how to cater to both groups or risk failing them all.
If there’s one lesson for investors from the past five years, it’s that chopping and changing their strategy – even in the face of massive market turmoil – doesn’t always pay.
JP Morgan set to win big T-Corp tender
By Greg Bright
NSW Treasury, which oversees the $70 billion NSW Government’s T-Corp amalgamation of the underlying investments of three separate Government-controlled funds, is expected to announce the winner of Australia’s largest-ever custody tender in the next couple of weeks.
After a review and tender process, which lasted more than a year, JP Morgan has been selected as the preferred custodian.
The custody review was part of a raft of changes in the second phase of the restructure of the NSW Government’s portfolio and fiduciary investments and commitments. The second phase includes a rearrangement of senior management at T-Corp, under chief executive David Deverall.
The three contributing funds are the old T-Corp ‘Hourglass’ fund, NSW’s workers’ compensation fund, now called ‘icare’, and the defined benefit State Super fund, more correctly known as SAS Trustee Corporation (STC).
They each had a different custodian, necessitating a review, although the review probably would have occurred anyway given all the other changes at the organisation. The universe of candidates was extended to the whole market of six major securities services providers with Australian presences. The incumbents were: BNP Paribas for T-Corp, State Street for icare and JP Morgan for STC.
As previously reported, after all the early strategic work the field was initially narrowed to four candidates – the three incumbents plus Northern Trust. For the final negotiations and assessments, it was whittled down to two – JP Morgan and BNP Paribas. And now there is one.
Not only is this Australia’s largest competitive tender involving superannuation and fiduciary management, it is also, arguably, the most complicated. T-Corp itself has more than 140 NSW Government agency clients, including NSW Treasury. STC is a closed defined benefit fund with a long tail of retirees to be managed. icare, the smallest of the three, is a fairly straight-forward insurance fund.
The three underlying funds retain their own boards and senior management. They also continue to oversee asset allocation for their parts of the combined portfolio. The three of them, therefore, have had to be engaged in the custody tender process and sign-off, as well as NSW Treasury.
The review process, which was called ‘Common Custodian Project’, and negotiations with the custodians followed strict NSW Government procedures. One custodian involved in the process found it “interesting that a ‘probity officer’ attended the important meetings to ensure nothing untoward was spoken”.
For JP Morgan the win will be a welcome relief, having this year lost STC’s sister fund, the $56 billion First State Super, as a client, which shifted to State Street after a review. STC and First State share a common administrator, the NSW Government-owned Pillar, which announced the end of its own review process last week with its sale to Mercer (see separate report). A probity officer also attended those meetings.
The T-Corp custody tender result is likely to be announced by Gladys Berejiklian, the NSW Treasurer.
As previously reported, chief executive David Deverall has instigated a spill of several senior positions at the organisation, including that of the CIO, Mark O’Brien. A new position of general manager of client servicing is understood to have been already filled but unannounced. Deverall is likely to announce his new team in the new year, although Gladys may prefer to announce that herself too.
