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Foreign Exchange

Qantas Super outsources FX execution to agency broker RIS

Qantas Superannuation, the A$6 billion ($6.35 billion) pension fund for the Australian airline, has appointed Russell Implementation Services (RIS) to provide agency FX execution services.

The arrangement will outsource Qantas Super’s FX trading and settlement for active global equities and alternatives to RIS’ global trading desk. RIS will also manage operational risk and provide Qantas Super with comprehensive performance reporting.

The decision to use RIS will reduce FX transaction costs relative to the pension fund’s traditional FX execution services, Russell argues. It estimates that the fund could save A$1 million per annum. Seattle-based RIS has been operating as an FX agency since 2003.

“Our research shows that many funds are unaware that FX transactions can be so costly, and investors can’t assume that FX trades are being executed efficiently by their investment manager, says Ian Battye, a managing director at RIS, in a statement. He adds that in Australia, Qantas Super is seen as a leader in the monitoring of transaction costs and then taking definitive action to find a long-term solution to reduce the costs that could drag on members’ returns due to FX leakage.

“Implementation efficiency is a key focus for Qantas Super as we strive to deliver the best risk-adjusted returns to our members,’’ says Andrew Spence, Qantas Super’s chief investment officer. “We have undertaken extensive due diligence to quantify the costs associated with FX trade execution and to find a solution that delivers enhanced transparency and cost efficiency.”

Interest in transaction cost analysis (TCA) has increased in recent years after a slew of lawsuits, particularly in the US, were taken out against custodian banks State Street and Bank of New York Mellon by state pension funds for alleged fraud in the handling of currency trades. Other agencies, such as Louis Capital Markets, have emerged as potential providers of such TCA services, which typically lead to winning execution business from their clients.

Credit Suisse and Morgan Stanley have emerged as two of the leading bank providers of these services.

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