The Australian custodial and administration sector has passed the $3 trillion milestone for the first time, according to industry research released this week.
Buoyed by 5.2 per cent growth in the second half of the year, after a sluggish 1.4 per cent start in the first half, assets under custody were twice the market value of the S&P/ASX 200 at December 31, 2016, the Australian Custodial Services Association (ACSA) reported.
“The contributing factors for the growth have been a bounceback in markets in the second half of the year, and the 9.5 per cent mandated super contributions, which have been offset by outflows in the redemption and pension phase,” ACSA chair David Knights said.
The past year has brought an increase in outflows from institutional super funds, Australian Prudential Regulation Authority superannuation statistics show. A major driver of this has been the growth in the number of retired members.
Despite the increased redemptions, however, the custodial industry is still on a path to reach $9.5 trillion by 2035.
“The contribution of superannuation assets is now almost double our GDP, again one of the highest in the world, and the custody sector plays an important role in this large and complex system,” Knights said.
He added that an interesting finding from ACSA’s statistics was the 2.6 per cent decrease in the volume of listed transactions, along with the 13.7 per cent uptick in unlisted unit trust registry volumes. This fits into the broader long-term trend of super funds allocating more to unlisted assets.
State Street was the firm with the largest increase in funds under custody, at 45.3 per cent, largely a result of Victorian Funds Management Corporation transferring there from NAB Asset Servicing.
JP Morgan remained the largest overall custody provider after knocking NAB Asset Servicing off the top spot in June 2016.
A statement from ACSA listed other key trends:
- A strong onshore bias, with $2.14 trillion of total assets under custody (AUC) Australian. Non-Australian assets were at $973 billion. However, offshore assets grew faster, at 7.6 per cent, than onshore ones, at 4.3 per cent.
- The level of Australian AUC for foreign clients (sub-custody) grew by 8.7 per cent, to $1.3 trillion, compared with 3.4 per cent growth in the six months to June 30, 2016.