Norges Deal Live: Insights into the $890 Billion Mandate

The assets of the $890 billion Norwegian sovereign wealth fund (SWF) have successfully transitioned from J.P Morgan to Citi in a deal comprising custody and securities lending.
By Janet Du Chenne(59204)
The assets of the $890 billion Norwegian sovereign wealth fund (SWF) have successfully transitioned from J.P Morgan to Citi in a deal comprising custody and securities lending.

The assets switched over in mid-November in the biggest ever transition of assets in the custody industry.

The deal, made public in May this year, is the culmination of two and a half years of work and a thorough planning process that saw Richard Ernesti, Citi’s global relationship manager, relocate from New York to London to serve as senior relationship manager to Norges Investment Management, the client who manages the assets on behalf of the SWF.

Ernesti will lead on the servicing of the assets “front to back” over a period of seven years, the term of the deal.

His role included scoping the deal with a team of others and bringing it on board.

The servicing includes ensuring the fund is margin positive, and essentially the ownership of the delivery and the P&L. Through Ernesti, Norges will have a single point of contact and coverage model.

Ernesti describes the migration as very successful in terms of the on-boarding of the assets.

“We do feel that one of the reasons our clients work with Citi is our physical on the ground presence in 62 markets,” he says.

As primary provider and appointed agent, Ernesti describes Citi’s involvement in settling the deal. He stated that during the process “over 250 Citi staff met with the Norges Investment Management team.”

“One of the interesting things about the deal is the operating model; in addition to the economics, there was a willingness to realize increased efficiencies through consolidation across custody and securities lending,” he says.

The mandate, believed to be one of the largest in the industry to date, was also thoroughly orchestrated across multiple teams while maintaining a single touch-point for relationship management purposes, says Ernesti. “We worked around the clock to make sure things were progressing smoothly and we would be well structured for when we turn on the switch.”

In terms of the structure of the deal, it went from scope, to win, to implementation and to service. “We are now in the service stage which is the live environment,” says Ernesti.

As part of the deal, Norges can now benefit from an on-the-ground network and use Citi to extend their reach and business in markets they want to expand into. It is understood that the fund owns approximately 1% of all listed equities globally. They are a major equities player and require services like proxy voting and corporate actions, says Ernesti.

The fund recently reached a major milestone when it passed the NOK6 trillion mark in terms of assets. Its size and monthly revenue growth are largely attributable to its investments in oil, petroleum and natural gas and to Norway’s natural reserves.

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