Deal: The NSW government has selected a common custodian.

Value: $70 billion

Area: Government tender

Key players: The Allen & Overy team was led by partner Jason Denisenko, with support from senior associate Lucy Adamson and associate Renji Cai. Senior associate Jackie Donald and associates Catherine Chan, Catherine Dawson, Jeanette Rose and Justin Chen also assisted.

Together with their teams, technology partner Michael Reede assisted with advising on the transition aspects of the deal and partner Peter McDonald advised on competition law aspects.

Partner John Samaha provided advice on privilege issues; counsel Jason Gray provided FCPA advice. Counsel Ka Sen Wong advised on taxation and securities lending issues.

Deal significance:

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On Monday, NSW Treasurer Gladys Berejiklian announced that JP Morgan had been selected to provide a single custodial service for three of its key asset pools, a consolidation move that is expected to save the NSW government around $80 million over 10 years.

“The NSW government is committed to eliminating unnecessary spending and shrinking costs within government where possible,” said Ms Berejiklian.

“This selection delivers on our ongoing commitment to deliver better value to the people of NSW by eliminating unnecessary duplication.”

Allen & Overy advised the NSW Treasury, the NSW Treasury Corporation (TCorp), the SAS Trustee Corporation (State Super) and Insurance & Care NSW (icare) on the selection process for a common custodian.

Mr Denisenko said JP Morgan’s cross-jurisdictional reach was a major advantage to the government.

“It’s a major outsourcing project from the government because while [each asset pool] might separately undertake the investment decision-making, they need someone to help them manage the actual holding and recording and transactions in the assets that are spread all round the world,” he said.

Allen & Overy acted for TCorp, State Super and icare simultaneously. Each of the asset pools is governed by a unique regulatory framework, which Mr Denisenko said added to the complexity of the transaction.

“You’ve really got to approach each of them individually and work out how you can manage all those different requirements and still achieve an outcome that’s workable from a custodian’s perspective,” he said.

“So really, what that’s about is having a deep understanding of each of those individual clients’ needs and being able to translate that into a workable set of standards that the custodian needs to measure against.

“We had to comply with all the government requirements in relation to probity and the way in which they appoint service providers, so it meant that it was a highly regulated process, right down to the basis on which we were allowed to communicate with the potential custodians.”

As a result, Mr Denisenko said, it was much less dynamic than a normal commercial transaction.

He said the market might see further consolidation of custodian services over the coming years, as institutional investors look to manage cost exposure while improving service levels, as a result of pressure from private-sector asset managers.

“That’s one aspect that I think there will continue to be focus on, but also because of the increasingly global nature of the investment market, that you’ll continue looking to appoint these sort of service providers that are able to manage access across many jurisdictions,” Mr Denisenko said.