Challenger goes for growth with State Street

Challenger has selected State Street to provide administration and custody services, saying the partnership will support several new global business initiatives. The decision will see some Artega Investment Administration staff transition to the custody giant.

Challenger's custody needs have been taken care of by Citi since 2012 but will now transition to State Street, occurring in three phases and with a view to completion in early 2027.

Administration services, meanwhile, were being provided by Artega Investment Administration, born out of Challenger via a partnership with SimCorp. These will now be delivered through State Street Alpha and some 100 staff associated with Artega will move over to State Street, including Artega chief executive David Mackaway and executive general manager Ross Gulliford.

In total, State Street will oversee $127 billion in assets under management on Challenger's behalf, comprising Challenger Investment Management, Fidante, and Challenger Life.

The partnership will support Challenger's strategy to build on its core strengths in retirement, investment management and asset origination, it said.

"As Australia's leader in retirement income, and through Fidante, a partner to many of Australia's best-known boutique funds management brands, State Street is ideally placed to support our growth ambitions. In selecting a world leader to uplift our investment operations technology and capability, it will allow us to further focus on our core strengths of retirement services and investment management," Challenger managing director and chief executive Nick Hamilton said.

"State Street has a strong track record of servicing investment managers and institutional clients. Their leading technical capability, platform investment, and global footprint will support our business and affiliates in executing on the significant opportunity ahead, at the same time as delivering a high-quality service and innovation for our affiliates and clients."

Also commenting, State Street country head for Australia Tim Helyar said: "As we welcome Challenger as a new partner, we are excited to be adding a large number of talented and experienced investment management and fund administration professionals to our team here in Australia."

"By growing our talent pool, we are enhancing our capacity to meet and exceed the increasingly complex needs of our clients in Australia. We will continue to invest and strengthen our servicing capability as part of our commitment to the Australian market."

State Street is the second-largest custodian in the local market behind J.P. Morgan. According to the Australian Custodial Services Association, as at 30 June 2024 State Street had some $834 billion in assets under custody. Meanwhile, Artega is the fourth-largest administrator locally.

The news coincides with Apollo Global Management's decision to reduce its shareholding in Challenger.

Despite increasing its stake since July 2021, Apollo has now reduced its shareholding from 20.1% to 9.9%. As a result, MS&AD Insurance Group becomes Challenger's largest shareholder at 15.1%.

A spokesperson for Challenger said Apollo has decided to "redeploy capital to support its growth opportunities in other markets."