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The mandate win for Citigroup and Northern Trust follows the June announcement that the fund would invest a small amount of assets offshore, requiring the assistance of fund managers and custodians.
According to reports, over 80 global fund managers applied to look after NCSSF's overseas investments, while on the custody side, reports suggest that virtually every global player threw their hats in the ring for the securities servicing mandate.
It has been reported that the NCSSF will start investing offshore sometime before the end of 2006, with approximately $800 million expected to be placed in international equities and an additional $100 million to $300 million in fixed-income instruments, comprising mostly of US Treasuries.
"We welcome the decision by the NCSSF to invest offshore as a key measure to build a balanced and diversified investment portfolio for China's pension assets. As one of its global custodians we look forward to leveraging Citigroup's unparalleled global network to fully support the NCSSF as it expands its investment scope and geographic breadth to new markets," says Brett Krause, head of Citigroup Global Transaction Services (GTS) in China. "We are thrilled to win the mandate by the NCSSF and through our on-the-ground team in China bringing our global securities services expertise to the local market."
For China's national pension fund, Citigroup will provide an array of custody services, such as safekeeping, settlement, foreign exchange, income processing, corporate actions and data management with on-the-ground local relationship management. The securities servicing provided by Citigroup will also include several value-adds such as fund administration and performance measurement.
Northern Trust will provide the NCSSF a package of trade-dated, fully accrued, multi-currency international portfolio accounting reports in Chinese. Northern Trust specifically developed this Chinese language capability to support the NCSSF and other clients in China. The Chicago-based bank has been advising the NCSSF since 2002 on a consulting basis, with Northern Trust providing advice on setting up an internal infrastructure to support its overseas investment programmes.
The NCSSF was established in 2000 and reports directly to China's State Council. It aims to become a workable solution to the country's aging population dilemma serving as a strategic reserve fund accumulated by the central government to support future social security expenditures.
Its total assets in 2005 stood at Rmb211.79 billion ($26.96 billion) compared to Rmb171.1 billion ($21.78 billion) in 2004.
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The fund's 29.6% returns marked its best ever and exceeded its reference portfolio, which has 80% allocated to equities, by 1.73%.