Global Head of Custody and Fund Services • J.P. Morgan
Despite the changes that have occurred in J.P. Morgan in the last 18 months with the integration of the Treasury and Securities Services business into a new Corporate and Investment Bank (CIB), Nick Rudenstine has ensured the custody and clearing product looms large within the overall organization. This is mainly because of his grounding in the bank across many transaction services business lines but also because of the vision he acquired while serving as head of strategy for Treasury and Securities Services globally.
Rudenstine was given the opportunity to run the global custody business in 2010. Then, following the decision to merge custody with the bank’s fund services activities, he was given a role as head of that combined business. That combined business then became part of Investor Services, under Carlos Hernandez, which includes Agency Clearing & Collateral Execution and Prime Services.
Senior management recognizes the importance of the business to the firm’s clients, the scale of the business, its low capital intensity and the positive secular trends that help drive growth, says Rudenstine. “We don’t publish numbers on this business as a standalone, but these are very good return businesses for the firm,” he says. “In addition, the senior team of the Corporate & Investment Bank have a deep understanding of what these businesses are—fundamentally they are service businesses that rely on technology and operations—and what they mean for our clients. As a result, we are investing heavily in these businesses, and we see significant growth for them over the medium and long term.”
The continual investment chimes in with investor and asset owner clients’ continued push for better and more integrated capabilities from their providers, says Rudenstine. And clients are getting more selective and more focused in terms of the number of outside providers they will work with. “At the high end of the market, the largest asset owners and asset managers are likely to continue to have multiple providers but they may have fewer of them than they have today,” he says.
“They want providers that are truly global and that have broad capabilities. We think J.P. Morgan is well positioned for that trend. There are few, if any, competitors that have world-class capabilities across prime brokerage, financing, clearing, collateral management, custody, and fund administration, all under one roof. So we are hoping that model is a good one for clients, but it does mean it’s incumbent on us to make sure all of the pieces are integrated.”
While custodians predict general fee compression over time, they are continuing to invest in their businesses. It is this investment that will help to offset the fee compression, says Rudenstine. “As we realize efficiencies they are going to continue to expect to see some reasonable amount of benefit out of that as well,” he says. “My own sense and experience is that that is a rational discussion, so I’m not worried about it in and of itself, and there are places where providers are able, for certain products and for certain services, to charge for the value they are providing on a standalone basis.”
Rudenstine believes there is an opportunity in regulation to further expand J.P. Morgan’s product suite. “There are things coming like T2S which will allow us to be more efficient, but they’re not really driving fundamental changes to the way we do business. For us it’s been our day-in day-out work of building out new products, new features, continually improving client reporting, working with clients on some of their regulatory challenges like Stronger Super in Australia and Solvency II in Europe. It’s just the day-to-day business of getting better every day and doing more for your clients every day to help figure out where do they need to be in two years and making sure we’re positioned to help them at that time.”
–Janet Du Chenne