Telstra Super, Australia’s largest remaining corporate super fund, has shaken up its investment operations for the second time in three years, appointing a new custodian and announcing senior management changes. In a low-return environment, investment operations are increasingly at the fore.
The $16 billion Telstra Super has appointed JP Morgan for master custody, following a review by Drew Vaughan of Dymond, Foulds and Vaughn. JP Morgan replaces NAB Asset Servicing, which has serviced the fund for about 25 years.
But there are a lot of long-term custody and securities servicing contracts up for review at the moment, fuelled by a range of factors, especially the low expected returns from markets, which means that every basis point counts.
As a result, JP Morgan executives should not be celebrating their Telstra win too hard. They have a lot of work to do. They have two big contracts to defend coming up: the $60 billion First State Super defined contribution fund and the $35 billion closed defined benefit State Super of NSW, which has merged investment operations under the new $70 billion NSW Treasury Corporation (T-Corp) fund.
First State Super, whose deputy chief executive, Graeme Arnott, is a former senior custodian himself, has appointed Morse Consulting to run a review and tender process. Morse, together with independent Brett Elvish in Melbourne, recently ran the VFMC tender which saw State Street with the business back from NAB. That review, with JP Morgan as incumbent, has been running for several months and involves a contract which goes back about 20 years.
With the NSW T-Corp review, which is unlikely to get underway for some months, the entity has three incumbents: JP Morgan for State Super, BNP Paribas for the old T-Corp, and State Street for the old NSW Workcover.
Telstra Super last reviewed its custody and securities servicing arrangement with NAB in 2012, resulting in a broader level of service and a reduced overall fee. This was undertaken by the former CFO, Christina Liosis, with advice from Patrick Liddy of MSI Group. The switch from NAB has therefore been seen as a surprising move by custody sector participants.
Meanwhile, Telstra Super confirmed some investment operations management changes last week. Industry newsletter ‘Insto Report’ reported that Telstra Super had established a new investment operations team, led by head of investment operations, Miles Mallick.
The team is responsible for investment reporting and administration, settlement and trade order management, investment compliance, performance and attribution, and the custody relationship, the newsletter reported.
“As a result, the investment operations team has taken over some responsibilities from the finance department and this means the manager performance measurement and reporting role, which was held by Telstra Super veteran Lynda Dyt, no longer exists. Dyt leaves the $16 billion corporate super fund after having spent more than 14 years with it, including a short stint as acting chief financial officer.”
– Greg Bright
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