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.
Northern Trust on a roll with asset servicing wins
(Pictured: Rohan Singh)
Northern Trust has picked up three big new asset servicing clients in Australia in the past few weeks, including, most recently, the $14.8 billion investments portfolio of IAG (Insurance Australia Group).
While neither IAG nor Northern’s head of Australian business, Rohan Singh, were able to comment on the mandate last week, they supplied a “holding statement” which said Northern would provide custody and selected investment accounting across Australia, New Zealand and selected Asian markets. “This follows a comprehensive review focused on the current and future needs of IAG,” the statement said.
The other two new Northern clients are ACT Treasury and, as previously announced late February, Energy Industries Superannuation Scheme (EISS).
Coincidentally, IAG, ACT Treasury and EISS were all JP Morgan asset servicing clients prior to the recent reviews. Luckily for JP, though, given the cyclical nature of asset servicing new business, the firm recently picked up the $20 billion Cbus as a client.
Northern’s client base in Australia has expanded rapidly since it built a tax-accounting system to enable it to provide more services to super funds. It has also been successful in the middle office area with fund managers, such as QIC. Its first and biggest client in Australia is the Future Fund, which it won at inception in 2005.
Custodians are going through a very busy time because of all the regulatory changes in funds management and banking. Last week, though, there was some relief provided through an extension of time granted by APRA to new reporting standards.
David Braga, the chair of ACSA (Australian Custodial Services Association), who is also a senior executive of JP Morgan, said: “We welcome the decision by APRA to allow the custody and superannuation industries more time to consult on the new reporting standards and then implement them. 
The custody industry, through ACSA, has worked closely with APRA to articulate the challenges custodians and super funds will face implementing the standards and to steer the development of these regulations.”
The changes are:
> Extension of quarterly superannuation data reporting period to 35 days, up to and including June 30, 2015,
> Deferral of select investment option reporting until July 1, 2015, with further consultation,
> Deferral of superannuation data collection for purposes of the Australian Bureau of Statistics.
