Custodians face fractured future super relationships, says DST

Technology could be the circuit breaker in the close relationships many super funds have with their sole custodian, according to DST Global Solutions regional head of business solutions Rhys Octigan.

According to Octigan, Australia's largest superannuation funds have already started to split custodian duties based on "best in breed" assessments, with the industry moving further towards the US model of outsourced relationships.

"As the big (US) pension funds merged and got bigger they started to bring this sort of stuff in-house," he said

"We think there will be continual merging of (Australian) super funds and increasingly the super funds will be looking for investment data management solutions."

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Multi-level custody arrangements could occur where funds utilised different providers' competitive advantage and managed other functions themselves.

A fund may choose one provider for middle office, one for its hedge fund solutions and another for its performance analytics, Octigan said.

"We're beginning to see big super funds have relationships with multiple custodians rather than a single one, and you're seeing that with some of the state sovereign wealth funds as well," he said.