Sumitomo Trust and Banking has named Citi Securities and Fund Services sole custodian for its new qualified foreign institutional investor (QFII) programme in China.
Under the mandate, Citi will provide custody services including settlement and safekeeping of assets, corporate action processing, income collection, recordkeeping and consolidated reporting to Sumitomo Trust. It will also offer relationship management, implementation and customer service in both China and Japan.
"As the first Japanese [trust] bank to receive an approved QFII license, the appointment of an experienced and innovative custodian bank was a key priority for us," says Akira Inoue, a senior manager in the global product management office at Sumitomo Trust. "Through partnership and mutual understanding, we are extremely confident that Citi is the right choice for our QFII programme."
The China Securities Regulatory Commission approved Sumitomo Trust for QFII status on July 15. As the only Japanese trust bank approved for the programme, it plans to develop a Chinese equity socially responsible investment fund for Japanese investors. Sumitomo Trust is still awaiting investment quotas from China's State Administration of Foreign Exchange before it begins investing in Shanghai and Shenzhen listed A-shares.
Other Japanese financial institutions with QFII status include Dai-ichi Mutual Life Insurance, DAIWA Asset Management, Daiwa Securities SMBC, Mitsubishi UFJ Securities, Nikko Asset Management, Nomura Securities, Shinko Securities and Sumitomo Mitsui Asset Management.
In March Citi won a QFII custody mandate from South Korea's Hanwha Investment Trust Management. According to a representative of the bank, it has eight existing QFII custody mandates and a "healthy pipeline" of new business in the works.
"In winning this important mandate, our unmatched track record in providing services for the most progressive QFII participants continues to gain momentum," says Harle Mossman, Asia-Pacific managing director and regional head of investor services at Citi Securities and Fund Services.
According to the bank, Sumitomo Trust's vetting process for a QFII custodian took less than a year.
For the 2008 fiscal year, Sumitomo Trust's consolidated net income fell 74.3% to ¥7.9 billion ($83.6 million). A significant contributor to the fall was the bank's multi-billion yen securities losses, including ¥57.4 billion in international asset-backed securities.