A deal to buy into one of the largest custodians servicing Australian super funds and funds managers appears imminent, following the apparent signing of a heads of agreement in London and high-level meetings in New York.
It is expected BNY Mellon Asset Servicing (BNY Mellon AS) will agree to purchase about 30 per cent of National Asset Servicing (National AS), the investment administration division of National Australia Bank (NAB).
The executive general manager of National AS, Leigh Watson, is said to have signed a heads of agreement on a joint venture deal with his BNY Mellon AS counterpart, Timothy Keaney, in London last month. This was followed by meetings in New York involving BNY Mellon AS’ Australian relationship manager, Brian Slade, and National AS strategy chief Carl Sperling.
BNY Mellon AS has acted as global custodian for National AS since 1996. Buying into its client, rather than attempting to enter the Australian market as a stand-alone competitor, would ensure BNY Mellon AS kept that big global custody contract and gained wider exposure to the growth of the super funds which dominate the National AS book. National AS is Australia’s largest custodian, with almost $600 billion under custody for local investors as at December 31, 2009.
The joint venture deal would deliver National AS improved or new capabilities in several areas, include private equity administration, performance analysis and attribution, transition management, and middle-office outsourcing for funds managers (covering such services as trade matching and the provision of end-of-day positions to portfolio managers).
It is understood NAB is keen to keep the cash book of its custody clients under the deal, especially since it has the lowest level of retail deposits of Australia’s big four banks.
Industry stakeholders are also keen to discover whether NAB’s balance sheet will continue to fully stand behind the custody contracts, and to what extent Bank of New York Mellon’s balance sheet might lend support.
It is understood National AS has already been offering the BNY Mellon AS middle office capabilities in discussions with clients and prospects. The addition of the BNY Mellon AS global platform in this space is particularly timely in the case of Queensland Investment Corporation. The long-time National AS client is understood to be tendering for middle office outsourcing services at present, in a process initially assisted by consultancy Thomas Murray, but now being run internally by head of investment and portfolio services, Michael Nightingale.