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.
NAB re-wins Suncorp deal it never really lost
NAB Asset Servicing and client Suncorp have signed a new contract for custody and a range of other back and middle-office services following a complicated on-again off-again relationship between the two banks dating back to 2013.
The new contract, expected to be announced this week, lays to rest several years of uncertainty over the relationship, following a surprise tender in late 2017 and an announcement in July 2018 that BNP Paribas would become the new asset servicing provider after a lengthy transition period. As it turned out, NAB Asset Servicing (NAS) never really left the building.
A summary of the timeline is:
- 2013: NAS ‘buys’ a piece of Suncorp’s back office, including two technology systems, covering an estimated $25 billion of assets, and recruits 15 of its staff to continue to work on the Suncorp business, while also agreeing to a five-year service contract.
- Late 2017: Suncorp announces a review of the arrangement and a competitive tender process. The tender is overseen by Caroline Marull, Suncorp head of investment operations, with advice from Mercer, but Mercer is not asked to provide a specific recommendation.
- July 2018: Suncorp announces BNP Paribas Securities Services will become its new custodian, but keeps an option to retain NAS for 12 months during the transition.
- December 2018: Caroline Murall resigns from Suncorp to join Macquarie.
- August 2019: Suncorp suspends the transition process and continues to use NAS.
- 2019-2020: Business as usual as far as both are concerned while a new contract is negotiated.
All the parties involved, and those which chose not to participate, knew that Suncorp’s requirements would not be easy to satisfy. When the tender was announced in 2017, two big custodians chose not to bid for the business.
As previously reported, the mandate was a complicated one in several respects: it might shrink with a then-proposed sale of about $6 billion of Suncorp’s insurance assets which were included in the mandate; some of the assets were cross-invested in other Suncorp products, meaning they may be carried on the custodian’s books but cannot be charged twice; and, there were many separate products in the mix which tends to make for a lengthy transition.
In this week’s statement, Robert Raffo, head of investment operations at Suncorp says: “We are pleased to have NAB Asset Servicing as the custody partner for the Suncorp Group. Their continued investment in middle-office capability combined with a dedicated relationship and service team will be key to realising operational efficiencies and enhanced service offerings. Of specific interest to us was also NAB’s New Zealand middle office solution, which further supports their overall service level proposition.”
John Comito, NAB executive – asset servicing, corporate and institutional banking – says the team is delighted to continue the existing relationship with Suncorp. “As a key strategic partner, we are looking forward to supporting Suncorp deliver on their corporate vision through the delivery of leading custodial services,” he said.
“Our business provides clients with direct access to Australian and New Zealand markets and global investment opportunities through our strategic partnerships. We have a comprehensive and local knowledge of the ever-changing regulatory and industry landscape.”
