State Street has underscored its positioning in the superannuation market with the publication of a new paper outlining the big trends and how its services suit the emerging industry landscape.
For the first time, State Street has devoted its regular ‘Vision Focus’ client publication to the Australian market, providing a general overview of where it sees the super industry headed post the Cooper Review.
Ian Martin, local head of State Street Global Markets and State Street Global Services, said yesterday that the paper indicated the firm was continuing to re-engage with the super industry and was particularly well positioned given the major political and market trends.
“We’re the largest servicer of pension assets in the world, administering about US$4.5 trillion in assets,” Martin said. “From our position in the market, both in Australia and globally, we can see there are a lot of competitive opportunities in the way the market is serviced,” he said.
“The core trends play well to us. They include more big, cross-border, sophisticated entities… All trends involve a push towards consolidation. And scale leads to greater sophistication. It also leads to the in-sourcing of investment activities (of pension funds).”
Jeremy Cooper has recommended in his Review of the Superannuation Industry, the need for reduced costs overall, which could come about through the introduction of his My Super and Super Stream Proposals, coupled with amalgamations among super funds.
State Street’s other arm, SSgA, which is run by Rob Goodlad in Australia, will also be a beneficiary of this trend, especially if My Super is approved, because it has index and ETF-providing capabilities.
State Street largely vacated the direct servicing of super funds in Australia about 10 years ago but subsequently re-entered the market and re-engineered its offering for super funds, including the servicing of their alternative investments. It’s first new client was NGS Super.
Martin said greater scale forced funds to emphasise cross-border transactions because they had to look elsewhere for investments and needed a servicing capability to support that.
Tax was also a huge issue, Martin said. State Street had invested in a fully functional capability to provide propagation-type services for super funds, which allow the aggregation of transactions to minimise tax-per-parcel of shares transacted. The service is also beneficial for multi-managers.
The paper points out that, in relation to downward pressure on costs, member administrators and investment administrators did not have a lot of room to move.