Someone who watches the big global moves more closely than most is Jacques-Philippe Marson, the president and chief executive of BNP Securities Services in Paris. He wrote a paper entitled ‘Vision 2036’ in which he imagines a situation with only three major global custodians left 30 years from now. He also considers that such a scenario could even result in BNP Paribas having its head office in Shanghai.
Marson asserted during a visit to Sydney in December that the wealth of nations in the future would come from natural resources and manpower, so India, China and potentially Brazil would be increasingly important. However he said that no-one could ignore Australia, not because of its natural resources, but because of the size of its savings market.
Australia and New Zealand represent the fourth-largest of the 30 BNP Paribas Securities Services locations around the world, with Sydney used as a regional headquarters. “We’re expanding in Asia,” Marson said. “We’re considering Hong Kong, Korea, India and China. We have a ‘client window’ in Singapore. We believe that the closer you are (to clients) the better. We have a decentralised model.” He suggested that Australia needed to create a new regulatory and tax environment to make it easier to do business in a global world.
As an aside, Marson made a personal prediction that the Dow Jones index (currently about 12,800) would go to 20,000 by 2015 because “the whole world is saving”. David Travers, managing director of investor services at State Street Australia, says his firm’s services have evolved with the needs of the market. Large super funds today have requirements which are often just as sophisticated and demanding as those of its funds manager clients, he says.
Having last year transitioned the super fund Non-Government Schools Super, and insurance fund NSW Workcover, alongside manager Credit Suisse Asset Management (CSAM), State Street is currently emphasising middle-office outsourcing as the next wave for managers. “We’re rolling out our middleoffice functionality,” Travers says. “With CSAM as a new client we have a timetable and we plan to expand the global functionality of our services in the region.”
While the lines between back, middle and front office services are blurry, they can be broadly divided into: asset servicing (back), asset gathering (middle) and asset managing (front), with pre-trade activity in the front and post-trade in the back. Pure backoffice activities include trustee services, safekeeping and settlement, corporate actions and proxy voting. Moving towards the middle are: transfer agency, fund accounting and portfolio reporting. In the middle are: performance measurement, compliance, currency flow analysis, risk management and online reporting. Moving towards the front are: securities lending, foreign exchange, cash management and transition management. In the front office are various fund distribution and platform interface services.