JP Morgan’s Australian head of custody sales, Bryan Gray, is anticipating a wave of custody reviews from superannuation clients in the second half of 2013, after funds navigate the transition to the MySuper regime.
Yesterday JP Morgan was confirmed as the custodian for the $21-billion HESTA superannuation fund, which represents the health and community services sector.
Confirmation of the mandate continues an 18-year relationship with the fund and will see JP Morgan providing custody, portfolio administration, securities lending, performance, compliance and unit pricing to the fund.
Gray told I&T News that he expected the market to go quiet on new mandates and reviews now until the middle of the year, as superannuation funds in particular “worked with their custodians” to comply with MySuper and the raft of regulatory change around it.
“But I would be expecting competition to intensify in the second half of the year, once the focus goes off MySuper,” he said.
“The reality is that with the new global entrants into the custody market, it is more competitive now in this country than it has ever been.”
In addition to more intense competition, Gray said custodians were being asked to do more for their clients, not just in terms of helping them navigate the regulatory environment and providing more granular information, but also administering new asset classes in the alternatives area.
“As funds expand into alternatives, they are needing more details and more information on those investments and their valuations,” said Gray.
“You look at areas such as private equity and over-the-counter derivatives, at one point funds may have had very little in the way of these assets to administer, but now they are requiring more information to match the complexity of these investments.”
JP Morgan claims second ranking in the Australian custodial market, with $336 billion in assets under custody and administration. The US bank is facing strong competition in the custody markets from NAB, Northern Trust, Citi and State Street, which last year prised the mandate for REST Super away from JP Morgan.