Liddy raises the interesting suggestion that if the master manager concept takes hold, then the ASX may no longer represent the major source of liquidity. “If there are a lot of new dark pools of off-market liquidity, then maybe the ASX will no longer be the prime determinant of price,” he says. “There are a lot of vested interests involved in this trend. Our role is to do the most cost-efficient job for the client, which is, ultimately, super fund members.”

Interestingly, before re-joining NAB in 2006, Liddy headed up marketing for transition management and some other services at UBS investment bank in Sydney for about two years. In this capacity he proposed that UBS move into the master manager arena but the proposal was rejected.

Across at JPMorgan, David Braga, head of product for the securities services division, says that there is a great deal of interest from both super funds and managers in improving the after-tax reporting and efficiency of their portfolios. “We’re finding that people are getting much more active with respect to tax. There are a lot of developments there. Products like propagation are helping to make sure that tax is being managed right across the fund.”

He says that JP Morgan, which also uses HiPortfolio, has a similar concept to the master manager service which it is discussing with one of its larger clients. “We think there are potential benefits there, but perhaps these have been overstated,” he says. “If the main goal is best execution, you can already go to one of the existing off-market facilitators.” Braga points out that tax reporting is also important in helping clients to manage funds on an appropriate tax basis. “You have to make sure that it comes through in all the other services, such as unit pricing. It’s clear the market is moving to be more active in the management of tax.”

He believes that the initiative by multi-manager Warakirri Asset Management, which introduced after-tax benchmarks for its funds last year – and also worked with ITG – will become more prevalent. However, there is as yet no standard for after-tax performance reporting. Scott MacDonald, managing director of RBC Dexia Investor Services in Australia, says that each custodian has clients who want the reporting a different way. “There’s no one model yet. But it’s early days. There will have to be a standard at some stage,” he says.

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