The ‘master manager’ concept has captured the minds of super funds looking to eke out more savings in the implementation of their investment strategies. GREG BRIGHT reports.
The launch of a master manager service by NAB Custody last year marks potentially the most important change in investment administration in two decades. While super funds have expressed a lot of interest in the service, which promises savings of up to 100bps, they are being cautious about committing themselves. Mercer Sentinel, the largest specialist consultant in Australia, is currently reviewing the offering for clients.
Lounarda David, regional director of Mercer Sentinel Asia Pacific, says: “The master manager idea is a great initiative. It’s good to see that custodians are looking outside the box of traditional custody and investment operations space, and into areas that historically have been investment managers’ responsibility.
It also means that someone will be acting in some form of investment management capacity, looking at the investments at a consolidated level, trying to reduce unnecessary turnover and also making sure that at that level transactions are executed efficiently and cost effectively, both from a trading and tax perspective.”
She says that it actually takes the definition of custodian to a new level. “If they’re doing master manager, emulation and propagation, what do you call them? Custodians?” John Treloar, head of NAB Custody, says that the master manager and other new services represent a natural progression for super funds to improve the efficiency of their operations. “It is also a natural progression for custodians to better leverage their capabilities and add more value for clients. None of this is really new. We’re just putting together all the pieces much better and in the end it’s the members who are the big winners.”
Each of the custodians which have super fund clients is watching the space with interest, although NAB appears to be most advanced with a product. NAB is hopeful of having its first super fund in a pilot program in the first half of this year. NAB Custody held a series of presentations in November. Patrick Liddy, the director of marketing and strategy, and Vicki Martyn, head of product development, said that master custody was the “basic engine” for custodians, which had not changed much in 25 years.
They predicted that, just as with the introduction of master custody, it would take about five years for the new implementation services to be widely adopted by institutional investors. For NAB, there are three different services being offered. When combined with overlay programs, they are similar to what QIC refers to as ‘omega management’.