By Greg Bright*
Mercer Sentinel is looking to expand its capabilities in workflows among super funds and other clients, targeting inefficiencies between front, middle and back-office systems and procedures. Peter Baker, who joined the firm as Australia and New Zealand head late last year, has already recruited a senior consultant.
Baker, who joined from BNP Paribas Securities Services, where he was Australia and New Zealand head, in November, has recruited Tricia Nguyen in Sydney. Nguyen, a former consultant at Russell in Sydney and London, most recently also worked at BNP Paribas.
Baker says that Mercer Sentinel has the “right staff for now” but he could see the team doubling in size over the next 18-24 months because of the demand for its services.
“One of the areas we’re developing is in operational and technology flows,” he says. “If you think about front, middle and back-office flows and look at them in their totality you can see there are usually duplications and inefficiencies. It’s about having the expertise to improve on that.”
Mercer Sentinel is well known as the largest specialist securities servicing consulting firm in the world but Baker points out it has four pillars to its business – not just custody consulting.
They are: operational risk assessment; transaction services, which includes doing service level agreements, securities lending, cash management, mark-to-market FX, unit pricing and error remediation; transition management, whereby Mercer acts as agent rather than principal; as well as peer review of custodians.
Sentinel is heavily involved in the operational risk assessment of fund managers around the world on behalf of the investment consultants and for the Mercer trusts. It is an increasingly important area post GFC.
It includes: governance and organizational structure; human capital; fund structures; regulation, compliance and audit; risk control; technology; transaction execution; valuation and administration; and, third-party relationships.
The transition management area, which in the past has been a lucrative field for Mercer Sentinel worldwide, is primarily provided for Mercer’s own funds, which total about A$40 billion, more than half of which are Australian domiciled. But Baker says “consideration is given” to provide transition management for other clients.
A big part of his optimism about the growth prospects for Mercer Sentinel is due, unfortunately for super funds and other clients, the increasing imposts of regulation. APRA’s SPS 530 standard, for instance, provides for a level of understanding about outsource partners and the risks involved. Also, SPS 231 recommends regular reviews of outsource partners, and SPS 230 is to do with trustee operations.
Mercer Sentinel dates back to the late 1990s. It is a wholly owned Mercer brand which interacts closely with the larger investment consulting teams around the world. There is a global management team with three heads – for Australia and New Zealand, UK and Europe and North America. Baker believes there are good opportunities for more work in New Zealand, where BNP Paribas also has had a larger presence on the ground than its custodian competitors.
“I feel I have a good technical and strategic understanding of the products and services in this space. I want to take the Sentinel business forward and I have a great team around me,” he says. “We’ve completed the first phase of re-setting the team.”
The senior team members are: Matt Heeney, who has been with Sentinel for about six years, Kristina Ross, George Takesian, Ashika Narayan and, from last month, Tricia Nguyen.
* Greg Bright is publisher of Investor Strategy News (Australia)