Editors’ Choice Awards: Asset Servicing Deal of the Year

Global Custodian takes a deep dive into the nominees for its Editors’ Choice awards at this year’s Leaders in Custody event, beginning with the candidates up for Asset Servicing Deal of the Year.

By Joe Parsons

BNY Mellon – National Pension Service of Korea 

In September, BNY Mellon won a fixed income custody mandate from the National Pension Service (NPS) of Korea, one of the world’s largest pension funds.

The mandate covered $25 billion of NPS’s assets invested in overseas fixed income markets, and also included fund accounting, performance, compliance, securities lending and data solutions to NOS.

BNY Mellon defined the mandate win as a milestone for its Asia-Pacific business, which has been identified as a strategic focus for the world’s largest custodian. The partnership with BNY Mellon would also enable NPS to achieve global scale by increasing their allocation to foreign investments.

However, having won the mandate, the work was not over as they were required to onboard NPS’s assets within a strict time period. In March, just six months after BNY Mellon announced the deal, it completed the onboarding process.

Rohan Singh, head of asset servicing, Asia-Pacific for BNY Mellon, said at the time of the announcement: “We are delighted to complete the onboarding within a relatively short period of time, and to the requirements of NPS. This mandate markets yet another major milestone for BNY Mellon in Asia, and underlines our commitment to the Korean market.”

Citi – JP Morgan Asset Management

Very rarely does the asset management arm of a global custodian opt to use a third-party provider. However, in October 2018, that trend was bucked when JP Morgan Asset Management chose Citi, a rival global custodian to its parent bank, as its securities lending provider.

Citi would act as the securities lending agent for JP Morgan Asset Management’s $325 billion of lendable assets, which included exchange traded funds (ETFs) and 40 Act funds.

The funds would lend their underlying holdings to broker-dealers, hedge funds, banks and other large borrowers.

JP Morgan Asset Management surveyed seven lending agents, including their own proprietary lending agent and custodian, following an almost year-long RFP process.  

A significant factor for Citi winning the business was its Trading Analytics and Optimisation platform, better known as TAO, which gives trades a single platform to access all relevant market data and provider real-time insights that leverages internal and its own trading data sets. 

Northern Trust – Northern Pool

Northern Trust continued to make strides in the UK custody market in 2018 when it was selected by the £46 billion local government pension fund Northern Pool, as its global custodian.

Northern Pool, a collection of Northern England pension funds, is one of the largest of eight local government pension pools in the UK.

As well as including traditional services such as securities lending and fund administration, the deal also included a range of new services including compliance monitoring and carbon reporting services. It also represented the first local government pension fund to outsource its private equity administration.

The appointment follows a selection process which was supported by global post-trade risk and custody specialist, Thomas Murray. 

Northern Trust has become the custodian-of-choice for UK local government pension funds, having won eight similar mandates since the formation of the local government pension scheme (LGPS) asset pools.

State Street – Vanguard

Looking at where State Street was at the beginning of 2017, the announcement that it had lost $1 trillion of BlackRock’s assets to JP Morgan was a big hit. So much so, that State Street was in danger of being replaced by JP Morgan as the second largest custodian by assets.

In 2018, the Boston-based bank bounced back in a big way, exemplified by a series of mandate wins for Vanguard, the world’s second largest asset manager.

Over the course of last summer, Vanguard moved a portfolio of 16 mutual funds and a variable annuity portfolio from Brown Brothers Harriman (BBH) to State Street. This portfolio included the $414.7 billion Vanguard 500 Fund, its oldest index fund, a $110.3 billion Developed Markets Index Fund, and the $106.1 billion Totalled International Bond Fund.

In total, State Street won custody of more than $1.3 trillion of Vanguards assets over the course of 2018. The mandate win was Jay Hooley’s sign off from his 30-year career at State street, of which he served 18 years as CEO.