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This is the first deal of its type from East Timor and presages an eventual outsourcing of assets to third-party managers. ôThis is all new to them,ö says David Edwards, head of sales for worldwide securities services at JPMorgan in Sydney.
The BPA was founded in 2005 initially to look after the new countryÆs oil wealth. It currently has $2.9 billion of assets under management and is growing at $200 million per month. But the national oil reserves are finite and the BPAÆs mission is to eventually become Timor-LesteÆs central bank û just as NorwayÆs Petroleum Fund morphed into the $300 billion-plus Norges Bank. It is the key institution in safeguarding the national wealth.
Therefore its asset allocation remains very conservative, with all the assets invested in US dollar-denominated Treasury bills, bonds and similar instruments. The BPAÆs governing law allows it to diversify up to 10% into other asset classes, and over time the institution will look to do so. For now it manages the assets in-house.
JPMorgan will provide custody including settlement, administration, accounting and performance measurement. As the portfolio diversifies, the bank will also provide mandate compliance monitoring and fund-performance services, to help the BPA monitor the portfolio and evaluate external managers.
ôWeÆre also going to help them build capacity,ö Edwards says. ôWe will help train their staff to understand how global financial markets work, and to understand how other sovereign wealth funds operate.ö
It is servicing the fund out of Sydney partly because of geographical proximity, and also because BPAÆs working language is English and its accounting is all done in US dollars.
Abraao de Vasconselos, general manager at BPA, says the fund wanted a bank with global experience working with sovereign wealth funds and central banks.
It is no coincidence that JPMorgan also provides services to Norges Bank.
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