(Pictured: Peter Baker)
Australian custodians are gearing up for the application of Stronger Super regulations with service providers Milestone Group and Ausmaq already coming to the party with their new procedures for funds to be able to post details of all their underlying securities by mid-next year.
The “look-through” regulation remains controversial due to several unanswered questions to do with getting information from offshore managers, hedge fund managers and so-called real assets managers. Nevertheless, according to major custodians, funds are warming to their task.
Systems company Milestone has introduced “pControl Regulatory Oversight”, a new module for its pControl technology platform, which was initially devised for unit pricing, but which now encompasses all investment transaction life-cycle management, cash and rebalancing, tax and reconciliation.
BNP Paribas Securities Services is the first custodian to go live with the pControl module, it was announced last week.
Mark Neary, Milestone’s managing director for Asia Pacific, said that custodians had gone onto the front foot with the regulations, having already put a lot of thought into how they would approach the “look-through” requirements.
“The funds themselves have been working on it too,” he said. “A lot of it has to do with interpretations and how you categorize the securities. The funds are looking to do more than just provide a lot of raw data.”
Milestone has spent about a year on the new pControl module. Geoff Hodge, the group CEO, said: “Last year we started working with super funds directly – we have previously serviced them with unit pricing and cash and rebalancing, etc. via the custodians – as we saw their need for fund oversight of their outsourced operations.
“In getting to know the sector, we then saw the emerging need for a solution to the upcoming APRA reporting requirements. When we looked at the problem space we saw that the industry and service providers were grappling with the implications of it from a technology and operational perspective due to the volume and complexity of data and reporting requirements at entity level, and things like ‘look-through’. We then saw that as a specialist funds platform pControl fitted the bill. We held some market briefings, essentially saying ‘here is what we can do’…
“It is a new solution leveraging the pControl platform that can be licensed by existing or new clients… At the service provider end, we can also use it to move the data around where they need to provide it to the entity doing the reporting.”
APRA announced last week that the provision of information on the underlying assets of hedge funds would be delayed until 2015, with funds able to use estimates from composite strategies until then. For traditional stocks and bonds, however, alongside valuations for unlisted assets, details will need to be posted on websites for members from next year. APRA will issue some further guidelines.
BNP Paribas is using a mix of its own reporting and analytics system with pControl and the standard managed fund gathering of Ausmaq, the National Australia Bank subsidiary, which is expected to provide the information to all members of the Australian Custodial Services Association.
The other major custodians are currently using a mix of proprietary and outsourced systems. NAB, for instance, will use a separate provider for the member investment options of clients, to get to the granular level, and then Ausmaq for the look-through in the second phase of the regulations next year, which includes unlisted unit prices. Big clients of Ausmaq include Colonial First State and Perpetual.
Peter Baker, BNP’s head of client strategy and communications, who is due to take over as CEO later this year, said the challenge for the industry had been to gather the information in a standardized way to enable sharing between counterparties and minimize duplicate reporting for fund managers.
The enhanced data and analytics would also allow a greater ability to stress test a fund using BNP’s own performance analytics platform.