Thomas Murray, the influential global advisor to asset owners and their custodians, is, like many financial services firms, embarking on a new trajectory for future growth. The immediate next focus is on monitoring and due diligence of cash correspondent banks, plus technological developments.
On a regular visit to Australia last week, Ross Whitehill, the Thomas Murray chief executive, said that the firm was about to “go universal” to help improve the documentation and validation of the evaluation, appointment and on-going monitoring of the general participants known as “cash correspondents”.
Thomas Murray together with a working group of approximately 25 major banks, has observed a gap in the market to do with extent of evaluation and ongoing monitoring of the “cash correspondents”, similar to the current Securities monitoring Thomas Murray conducts for major banks. The London-headquartered firm, with an office in Melbourne staffed by Directors, Albert Kwok, Adam Zani and Brian Keogh, plans to issue its first widespread cash questionnaires in March, having run extensive pilots in Q4 2019. “There are several thousand active cash agents in the world,” Whitehill said. “We are looking at clients’ cash correspondents and assigning our own risk assessments using the familiar alpha symbology i.e. AA- etc,.”
He said: “Most groups including Thomas Murray do extensive due diligence on sub-custodians [often known as domestic custodians]. But what about the cash correspondents in general, where there is often less validation and monitoring conducted or inconsistent documentary evidence maintained? We are aware that the regulators are looking closely at this now”
With custodian banks, cash and foreign exchange management tend to be the most difficult to explain to their clients. As investment returns decline, on average, due to what appears to be a long-term environment of low interest rates, better efficiencies in cash and FX management are becoming more important. For big Australian super funds, especially, cash management is important because of the strong cashflow they get through the Superannuation Guarantee. Sometimes, especially in a toppy market, they struggle to invest the cash in a timely fashion. Their strategic allocation to cash will invariably be a lot less than their actual allocation at any particular time.
For Thomas Murray, technological developments are also very important, reflecting the growing importance of technology among the firm’s largest clients. Of Thomas Murray’s 100-or-so staff around the world, about 45 are technologists, Whitehill says. They include – developers and programmers as well as technical operations people.
While its big custodian reviews and tenders usually attract most of the press and industry attention for Thomas Murray here locally and globally – it’s the analyses and information it provides to the world’s major, and minor, custodian banks which is the core of its business. More of the firm’s advice and analyses are delivered via proprietary white labelled technology to the market participants.
An example is one of its tools, called ‘Supplier Select’, which is a due diligence questionnaire and procurement technology system designed for big custodian banks and their asset-owner clients. “We want to broaden the universe that we service beyond the traditional custody and depositary space into other bank and corporate divisions. This tool allows Asset Owners to meet Regulatory requirements more efficiently, with a complete and transparent audit record.” Whitehill says. Other core offerings include ‘Advisory & Analytics’, a post-trade risk and analytics service looking at Central Securities Depositories, market infrastructure and custodians, and Advisory Services, such as RFPs, Health Checks and any type of bespoke analysis for asset owners and the benchmarking of their custodian’s performance.
Thomas Murray doesn’t do investment performance analytics. It is mainly focused on efficiencies around what custodians and the managers they deal with provide to their clients. “We look at custodians’ competence to support their clients and the risk assessments we determine in using those custodians,” Whitehill says. “We do many institutional reviews per year and what we hear from the big banks is that we may represent as much as 50 per cent of the world’s business in that area. This Global reach allows us to provide any client with a true global understanding/benchmark of their service provider.”
Australian-born Whitehill, who still has close family in Perth, worked for Thomas Murray as head of sales and marketing for thirteen years, until 2008, when he left to perform a similar senior role at BNY Mellon in London, for about 10 years. After that position at the bank he returned to Thomas Murray as chief executive in 2018. The firm’s co-founder and former chief executive, Simon Thomas, became the executive chairman.