The Philippines' Government Services Insurance System (GSIS) has shifted the custody mandate for its global investment programme to JP Morgan Worldwide Securities Services a little more than a year after awarding the mandate to Citi.
Under the mandate, JP Morgan will provide what it deems "master custodian" services including fund reporting, compliance monitoring and performance measurement to the GSIS.
"We are delighted to have been selected by a key public institution like GSIS to provide them with custodial and fund services," says Laurence Bailey, Asia-Pacific CEO for JP Morgan Worldwide Securities Services. "The appointment highlights our commitment to the region which includes the recent move of our fund accounting operations to Hong Kong."
Citi was appointed by the GSIS as custodian to its global investment programme in November 2007. The bank declined to comment on the decision.
Citi has had a rough 2008, reporting a full year net loss of $18.72 billion. In addition, after injecting $45 billion into the bank since last fall, the US government has taken a 36% ownership stake, partially nationalising Citi. It did report the previous quarter has been profitable, however; and in Asia, the bank has been winning some custody mandates. Last week, Cambodia's central bank appointed Citi as its global custodian.
The GSIS launched its global investment programme in April 2008 with a budget of $1 billion. As of September 30, 2008, the total value of the pension plan's global investments was Ps1.2 billion ($25.6 million), up 5% since its launch. The programme's investments are in various asset classes in Asia, Europe and North America.
ING Asset Management and Credit Agricole Asset Management provide fund management to the GSIS.
The GSIS's decision to change global custodians marks a shift towards maturity for the region's institutional investors. Up until now, most custodial mandates have been firsts, with the custodial banks courting few second or third generation appointments. In more developed markets, including Australia, Europe and the US, selecting a new custodian is par for the course.
"The number of new funds being opened in the region has slowed down as people are more focused on internal issues," says Bailey. "People are looking at their providers and asking if it's a best fit [for them]. Seeing more master custodian appointments going on in the market is a signal that Asia is maturing."
The GSIS first extended its request for proposals at the end of 2007 and short listed banks included Citi, JP Morgan and State Street. The global custody mandate was awarded to JP Morgan in February and the bank plans to have the entire pension fund transferred to its custody by the end of March.
JP Morgan Worldwide Securities Services' Asia head of public sector Denise Kwok is overseeing the implementation of the government pension scheme's mandate.
According to the bank, over 50% of its Asia (ex-Australia) global and master custody revenue come from the public sector segment. The segment includes central banks, government pension plans and sovereign wealth funds.