by Greg Bright
NAB Asset Servicing has won two new clients – both from BNP Paribas Securities Services – in a welcome relief after a couple of tough years, from a business sense. Importantly, the wins were made on its own. NAB and Citi, its international partner, now do their own pitches.
REI Super, the $1.7 billion real estate agents’ fund, and RACV, the prestigious Victorian institution of roughly the same size, have both appointed NAB as their new securities services provider, replacing BNP. The REI move coincides with the announcement that long-standing chief executive, Mal Smith, has resigned and is looking for a new opportunity in the super industry. REI Super used Deloitte as its advisor. RACV declined to comment on its change of circumstances.
REI Super, which has about 30,000 members, had been with BNP Paribas for close to 20 years, Mal Smith said. The fund has an interested implemented investment arrangement with Morningstar, plus it runs some internal alternatives portfolios itself.
“After such a long time we were keen to review our operating model,” Smith said. “We had Mercer for admin, Morningstar as our investment manager [fund of funds] and BNP as custodian. NAS (NAB Asset Servicing) came back to us with an attractive offer and they seemed really keen to work with us. We’re now in the transition mode, which should be finished by about mid-May – hopefully before June 30. NAS is going to re-imagine our operating model, including pensions, efficient tax accruals and that sort of thing.”
Smith praised Deloitte for its professionalism, the firm’s due diligence on NAS and also NAS’s project management of its takeover of the BNP account. “I’ve been really happy with the way the whole thing has gone,” he said.
NAS has lost several big clients since it announced – inexplicably to the ASX – that the bank was putting its business on the market, in 2014, only to take it off the market a year later. The latest wins, and the new deal it has done with Citi, have settled its prospects. Australia’s only Australian-owned custodian appears to be back in contention.
Mal Smith, who has recently turned 60, is looking for a new challenge as, dare we say it, he enters his professional twilight years. He wants to remain in the super industry, though, he says. He is very happy with the way REI Super has performed in recent years and making the leap to something else is a difficult decision. He expects to work at REI Super into the second half of this year, helping whoever replaces him to get set in his or her role
Given the nature of the real estate industry, REI Super’s members tend to have a healthy average account balance. Smith believes that the fund will lose only about 3-4 per cent of its members when the Government’s new regulation comes in on July 1, whereby members with less than $6,000 will be automatically transferred to the Australian Taxation Office.
NAB originally put the securities services business up for sale back in 2006. It was known as “Project Mexico”. JP Morgan was then the prime candidate to buy it.
After the 2014 announcement, State Street emerged as the most likely potential buyer, with a rumoured $1 billion on offer. NAB turned this down because State Street wanted to keep the more lucrative cash and FX business which usually goes with securities services.
NAS subsequently lost several big clients such as VFMC, QSuper and Suncorp, which it had actually bought. NAB replaced BNY Mellon with Citi as its international custody partner after Citi had won, in its own right, the master custody contract for the $35 billion Hostplus. Since then, after the NSW Treasury Corporation custody tender – the largest in Australia’s history – Citi and NAS have been doing their own pitches separately. This is understood to have been at NAS’s request.