Author: Australian Securitisation Journal, Issue 20, 2021
Perpetual Corporate Trust has been a leading provider of trustee, managed funds and data and analytics services to the Australian debt market for many years, including a notable strength in securitisation. Richard McCarthy, Sydney-based group executive at Perpetual, looks back at the developments that have led Perpetual to stand the test of time and shares the company’s view on the future of the market.
Perpetual has been a go-to service provider for many institutions over the past 10 years and beyond. What has allowed the company to stay ahead of a competitive field in an evolving market over this time?
Perpetual is a trusted Australian company that is more than 130 years old. Reputation is the real product of trust and this goes with our brand promise that trust is earned in every action, every day – we live and breathe this as a fiduciary. I also think how innovative Perpetual has been in supporting the securitisation market over 30 years is at the heart of staying ahead, supported by service excellence. Our product offering also meets the needs of our clients in debt-market services, across core trustee and document-custody business, which involves support to the nonbank industry.
Amongst the good examples are: the warm standby-servicer product – which we introduced in the wake of the financial crisis to give investors confidence – our covered-bond products to help banks obtain funding, and data-warehouse solutions that have been developed over 20 years.
We also provide financial-custody services in our managed-funds business to support global regulations directing holding 5 per cent of bonds. This ensures our clients are able to be compliant with their local and global obligations. Having such a broad product offering across our three businesses – debt markets, managed funds, and data and analytics solutions – is our core value proposition and differentiator.
Regulation and reporting standards have changed significantly since the financial crisis. How has Perpetual sought to improve efficiency and make clients’ reporting easier through its digital offering?
I might go back two decades to start with. Perpetual began as an Australian data warehouse, supporting credit rating agencies as the agent to collect, standardise and distribute data for the market through ABSPerpetual.com.
We further developed this capability to provide standardised data and analytics to the investor community, introducing products like CPR. Our data-warehouse capabilities and continued development put us in a unique position during the financial crisis, when the Reserve Bank of Australia (RBA) created new repo-eligibility data standards for its committed liquidity facility.
There was a lot of uncertainty in the market at the time and a lot of complexity coming through. Perpetual stepped forward and invested heavily in developing its data warehouse – to provide it between the issuer and lending community and the investors, intermediaries and RBA.
Looking back, this was the first step in providing technology solutions to support regulatory requirements for the industry, now called ‘regtech’. We worked closely with the Australian Securitisation Forum (ASF), and the non bank and bank communities to support the development of data standards for the RBA.
We increased our technical capability to enable us to collect, validate, securely store and distribute data to the RBA on behalf of our clients, as well as complying with RBA standards for privacy when posting data to our investor data warehouse product. In addition, we provide intermediary reporting to the likes of Bloomberg to create efficiency within the market.
We were promoting simple, transparent and comparable standards for the Australian community. I think we were pretty advanced relative to the European data-warehouse providers, as we developed and delivered quite early.
How does Perpetual bring this sort of data offering to clients?
We have really been focused on cloud computing. Thinking about how the business has changed over the years – from developing an investor reporting capability to a regulatory reporting capability, and then acquiring a roundtables business to give benchmarking and insights to our client base – we are continuing a natural extension of our service offering.
Perpetual is developing cloud solutions that will allow clients to have their workflow automated across the entire ecosystem. With cloud-computing technology, it becomes easier to develop digital solutions for the various needs of our clients and the industry.
For example, with the European Securities and Markets Authority standards, late last year we developed the ability to enable clients to meet investor and compliance requirements. It is a significant development that builds on where we started with capabilities for investors and the RBA, and now we are looking to support European and US regulatory requirements.
How are big data and automation reshaping the role of the trustee and how will digitalisation change the securitisation market in the next decade?
We look at this as three separate businesses. We have a debt-market service business, which is our trustee business. Then we have our managed-funds business, which is our financial custody business. The third aspect is our data and analytics solutions business, Perpetual Digital.
They are very separate parts of the market – and this is why I think we are quite unique in terms of where we have invested and diversified. The next frontier is our cloud-solutions offering. We are redeveloping payments and registry platforms into the cloud and making a huge investment to ensure payments are made seamlessly with reduced cyber risk.
This will enable us to create an automated workflow as we process more than A$250 billion (US$192 billion) of payments a year. This is huge scale and we process it with few errors. Linking this to the data-services business, we are processing A$500 billion of mortgages every month. It is about making sure we use technology to automate and create market efficiency through the workflow as this is the only way to operate at scale.
We are also moving our trust management business to the cloud, which means developing cash waterfalls and managing the trust with a solution called “Treasury and Finance Intelligence”. This is taking a holistic view of the securitisation market, to see how our clients use technology to optimise their portfolio when they come to do a deal.
It will enable clients to use their multiple warehouses, loans and specific characteristics to comply with investor requirements. It will bring issuers and lead managers closer to investors and really improve the investor experience. We are focused on developing the types of digital solutions we think we can help the entire securitisation ecosystem.
Finally, we are working on our roundtable business. The investor community has told us RBA reporting requirements was a great project but that the buy side did not receive a lot of benefit from it because there were lots of redactions, settings and different data provided pre-deal versus post-deal. This is something we can improve. Perpetual as a data warehouse is happy to invest in improving the investor experience. This, in turn, can only be a good thing for issuers. We are working on standardising pre- and post-deal data and analytics, and the plan is to move this into the ecosystem in the next 6-12 months.
Investor and regulator demand for reporting and disclosure on environmental, social and governance (ESG) products has also significantly increased in recent years. How is Perpetual helping clients identify relevant data?
Perpetual is very ESG focused. We acquired Trillium Asset Management in America last year, which is one of the world’s leading ESG fund managers. We conduct an annual research project with the ASF. This year’s project will be focused on sustainability to dig into the ESG theme and understand customer needs, and where the market is moving, so we can innovate our products to meet needs and requirements.
What does Perpetual believe is the biggest area of concern on the digital frontier that should be front of mind for its clients?
It is easy to talk about digital, but it is actually very complicated and expensive. We have a bold new vision: to be the most trusted fiduciary and the leading digital solutions provider to the financial services industry.
Moving into the cloud is positive and secure, but market users also need the technical skills and expertise to enable them to be the best partner they can be in the market. To achieve this bold vision, we have created a separate business, Perpetual Digital, which has more than 50 people combined with internal and specialist business partners, including 15 developers.
I certainly think the digital opportunity is enormous and we are focused on it. But it takes a lot of time, via developing experience and expertise, to be successful in digital.
We believe we can help enable clients through their digital transformation journey. We can then provide them with digital acceleration to achieve their strategy and goals faster and more efficiently than would have been the case without our support.