Taiwan's National Pension Insurance Fund (NPIF) is seeking a new custodian for its overseas assets, with incumbent BNY Mellon's contract due to end next month.
The Bureau of Labor Funds (BLF), the umbrella organisation for NPIF and other state retirement schemes in Taiwan, invited bids this week for the five-year custody mandate.
BNY Mellon was chosen as the first foreign custodian in 2012 for NPIF, one of the four sub-funds under BLF with an offshore portfolio. But BLF is not entirely satisfied with BNY Mellon's performance, said a source familiar with the retirement manager.
The bank chosen for the new NPIF mandate will provide custody for the fund's overseas investments managed both in-house and externally.
As of end-March, NPIF had NT$262.8 billion ($8.7 billion) under management, of which 41% was in foreign assets, with 22% in proprietary investments and 19% outsourced to external managers.
BLF, which oversees NT$3.6 trillion ($119 billion) of pension money in total, predicts that NPIF's foreign portfolio will more than double to around $10 billion in the next five years.
BLF's other three sub-funds to have foreign portfolios are the new and old Labor Pension Funds and Labor Insurance Fund. JP Morgan has been the custody bank for these three entities' overseas assets since they issued their first foreign mandates in 2008, 2007 and 2005, respectively. BLF, which appointed a new head in January, renewed all three initial five-year contracts with JP Morgan.
The biggest custody banks globally include BNY Mellon, Citi, JP Morgan and State Street.
Foreign banks applying for the NPIF contract must have at least $500 billion in assets under custody (AUC) as of December 31. If they not have a branch or subsidiary and a client service team in Taiwan, they must partner with a domestic bank with AUC of at least $3 billion, as of December 31.
In addition, the bank’s long-term debt credit rating should meet any of the following levels: A from Fitch or Standard & Poor’s, A2 from Moody’s or twA by Taiwan Ratings Corporation.
The application process started on May 2 and will close on 5pm on June 6. Submissions must be made in traditional Chinese.
BLF will judge applicants on seven main criteria: custody business (25% weighting), security of assets (25%), systems and resources (20%), financial strength and experience in custody business (10%), value-added services (10%), justification for the rate of custodial service (5%) and overall customer relationship (5%).
More details of the process can be found here.