JP Morgan re-wins Annuitas after $5b competitive tender

Article published by: Investor Strategy News on March 20, 2016.

The latest custody tender battle – that for the assets of the Crown Financial Institution (CFI) in New Zealand – has ended in victory for the incumbent, JP Morgan. The assets under administration total $NZ6 billion ($A5.37 billion).

Following a tender process launched in the middle of last year, JP Morgan was reappointed this month as custodian of the NZ$4 billion Government Superannuation Fund (GSF) and the roughly NZ$2 billion National Provident Fund (NPF) – both managed by Crown-owned entity Annuitas.

According to Annuitas chief executive, Simon Tyler, the tender attracted six bids with usual suspects BNP Paribas, Northern Trust and State Street understood to have been in the mix.

Tyler said the decision to retain JP Morgan came after a thorough review of bids aided by global consultancy firm Thomas Murray.

“We were very happy with the process,” he said. “It’s a good outcome that will see only minor changes [to the custody offer].”

Last year JP Morgan also won the bigger prize as custodian of the $30 billion-plus Accident Compensation Commission (ACC) fund in a role it previously shared with Northern Trust. However, in Australia, JP Morgan lost this month one of its most prized clients, First State Super, to State Street in a competitive review process.

Tyler said ACC provided valuable advice to Annuitas during the custody tender process. He said the review identified “slight differences” between the custodians up for the role but not enough to prompt a change of providers.

“We would’ve changed if there was a significant advantage in it,” Tyler said.

While the CFIs have been encouraged to share some operational services, he said there was no pressure to appoint a single custodian across all the major government-owned funds.

Northern Trust is currently custodian of the other large CFI, the approximately $30 billion New Zealand Superannuation Fund (NZS).

“It wasn’t a high priority to have the same custodian [as NZS],” Tyler said. “In fact, there’s a good argument for having a different one.” However, he said, the CFIs do “share a lot of expertise and ideas”.

Author: David Chaplin, Investor Strategy News 

Tags: CustodyCustody tender process