Australian Ethical locks in new custodian

Australian Ethical will transition its custody and investment administration to State Street.

The investment manager said its investment focus will be the delivery of "key inflight projects" in FY25, including the transition to State Street as its current custodian, NAB Asset Servicing (NAS), exits the market.

The other key project cited, announced last June, was the transition of its super administration to GROW Inc from Mercer, which will "enhance our member portal and the services we provide to our superannuation members," Australian Ethical Super, an entity controlled by Australian Ethical, said.

Australian Ethical Super said its administration provider supports the fund and its members by processing super and pension transactions, and providing a member portal for accessing correspondence, statements, and updating contact details.

The super fund will enter a planned limited services period later this month, which ends on November 4, as member account details are transferred to GROW.

"Whilst we continue to invest in our business platform, the completion of these projects is expected to deliver annualised unit-cost savings of approximately $4 million to recurring operating expenses," Australian Ethical said.

In selecting State Street, Financial Standard understands that Australian Ethical was encouraged by the strong interest shown from several custodians in partnering together.

It's understood that Australian Ethical conducted a broad-based market assessment, considering criteria such as delivery confidence, cost efficiencies, and the ability to executive custody services effectively.

These factors were carefully considered along with a strong emphasis on major service providers' approach to ethical considerations.

"State Street is a global leader, with a depth and breadth of capability that we are confident will support the implementation of our growth strategy," Australian Ethical chief financial officer Mark Simons said.

"Our decision to appoint State Street as our custodian and investment administrator reflects the quality and competitiveness of their offer."

Australian Ethical's default investment option has delivered an annual return of 3% over the three years to 30 June 2024. Meanwhile, over the past 10 years, it's returned 6.8% per annum, according to Rainmaker Information.

These returns lag the median for comparable options, which were 4.6% and 7.2%, respectively, over the same periods.