MARKET REVIEW | GLOBAL CUSTODY

More to do, fewer to do it

Is global custody still the business that gave our magazine its name?

o one would accuse the global custody industry of see convergence with some other areas of service such as moving too fast. Prudence, after all, is not meant to hedge fund administration and private equity administration,” Nbe exciting. Taking a long view, however, change is notes Nick Schmid, vice president, global marketing & inevitable, even if its slow pace gives a deceptive impression. communications, investor services, Brown Brothers Harriman. Expectations have certainly grown over time. “What was the “As we see global asset managers expand the range and last innovation in custody?” asks Gunjan Kedia, executive vice types of portfolios they manage, adding multiple alternative president (EVP) and head of U.S. investment services, State asset classes, the business is starting to bleed into some of Street in Boston. “We all got really excited about real-time the other surveys that Global Custodian has been running for reporting and that was a meaningful differentiator. Now it is many years. “ ridiculous to think you wouldn’t provide that kind of data.” With a quarter of a century of annual global custody surveys At the same time, some of the services that providers are behind it, therefore, Global Custodian decided this year to being called on to deliver no longer fit comfortably within assess the business landscape rather than ask clients to rate the traditional definition of the business. “We are starting to their providers at our traditionally granular level. In doing

36 globalcustodian.com Global Custodian | Spring 2015 MARKET REVIEW | GLOBAL CUSTODY

“We all got really prime custody as a service. They are trading on information intraday in real time so what they need is a little different.” excited about real-time Variation within client segments may also be masked by reporting and that was a broader segmentation. “Generally speaking, pension clients have similar problems, but the scale of the challenge might be meaningful differentiator. quite different,” notes Schmid. “If you look at a large pension Now it is ridiculous fund they may have hundreds of managers. Someone with a $2 billion pension plan may have five to ten managers.” The level to think you wouldn’t of complexity from an administrative perspective will therefore provide that kind of data.” differ considerably (see page 38). Post-crisis, regulators rather than clients have been Gunjan Kedia, State Street the principal drivers of the global custodian’s increase in responsibilities. “Regulations do not just impose requirements on us as a service provider, but also directly on some of the so, we wanted to see how much of the business we actually clients,” says Van Verre. “Reporting, for example, was in the recognise from the early days of our endeavours. past mainly around transactions we were executing for clients; The term ‘global custody’ was originally coined in 1974 by now it involves more and more information that clients are Douglas Bonnar, a managing director at Chase Manhattan Bank using to meet their own internal and external obligations to to describe a service that Ford Foundation had contracted from trustee oversight and management committees, so there is a the bank to cover its international assets. Twenty-five years shift in terms of how the information is being used.” later, the number of banks calling themselves global custodians This has implications for the way service providers organise had mushroomed. Fast-forward another 25 years and the their own processing and delivery capabilities. J.P. Morgan is number of service providers has been whittled down again, not only associated with the origins of the business through while the range of clients has expanded. But are they still its merger with Chase Manhattan Bank, but also with its being asked to do the same things? How do global custodians subsequent industrialisation through the launch of large see themselves and the challenges they now face? processing hubs. Historically, the bank maintained major “The term ‘global custody’ still means something, but we centres in Dallas and Bournemouth, as well as a number tend to talk in much broader terms with most of our clients,” of smaller offshore processing operations that handled less says Penny Biggs, EVP, Northern Trust and an industry veteran. complex – though high intensity – high intensity processes. “We survey our own clients on a two- to three-year basis and That is now shifting. “We see the industry moving to a 24x6.5 it’s a lot more complicated than it used to be. We used to send operating model,” explains Chris Rowland, head of global out one survey and now we need five or six versions.” custody at J.P. Morgan. This inevitably involves a pass-the-book type activity from Who needs it? one centre to another following the clock. “We have now The traditional client segmentation between asset owners implemented that with operational centres that can support and asset managers still holds for most providers though the end-to-end process. Consequently, we have been putting distinctions have grown within and between those two technology in place that supports a globally deployed umbrella groups. operating model,” says Rowland. “We split our clients into a number of segments that have Prudence remains a byword for the business, however. more or less the same drivers for selecting and buying their Ronald Akkermans, executive director, and head of custody services,” says John Van Verre, head of global custody, HSBC. FI sales and business development at UBS is another industry He sees insurance companies as fairly closely aligned to the veteran, who has seen predictions of paradigm shifts come asset management segment as many of the larger insurers run and go. “Sometimes I’m astonished at how much has actually their own internal investment function. Pension funds and remained the same,” he says. “Nevertheless, when we look public sector asset owners such as sovereign wealth funds at the value-added services, such as reporting, we are in an (SWFs) also tend to show similar buying behaviour. entirely different world.” The same applies to the liability that “There are some things that are universal,” says Samir custodians are expected to take for their product. “I think that Pandiri, EVP and CEO, asset servicing, BNY Mellon. “We is one of the drivers of consolidation,” says Akkermans. “The provide core custody to everybody, but we also have prime product today doesn’t necessarily get the credit it should have custody, where people need different cut-off and turn-around for the responsibilities involved.” n times. A lot of our alternative managers, for example, use – Richard Schwartz

Global Custodian | Spring 2015 globalcustodian.com 37 MARKET REVIEW | GLOBAL CUSTODY

The big data chase Beyond the core services of settlement and safekeeping, what are the largest asset owners and managers looking for from their global custodians?

n addition to speaking to service providers about how they identified additional services that are being provided to these Isaw the challenges the market was throwing at them, Global clients, they are listed in the provider profiles following). Custodian invited a selection of the largest and most complex asset owners and managers to comment on whether and how Satisfaction well their expanding service needs were being met. Since most Before exploring the service and product gaps that respondents these comments were provided on a non-attributable basis, we brought to light in the interview and survey process, global have decided to keep all quotes in this section of the market custodians can take comfort from the fact that, as indicated in review anonymous. They are, however, all from ‘household’ Figure 3, a vast majority – 89% – are either very satisfied or names in the investment industry that all global custodians would at least satisfied with the service they are receiving from their count among their most sophisticated and demanding clients. principal provider. None were totally dissatisfied, which is The first question we wanted to understand was whether good, because the pain involved in transferring to a new global clients still saw global custody as a discrete service provider remains non-trivial, advances in technology and requirement. Nineteen percent of respondents handled the automation notwithstanding. bulk of the administrative burden for non-domestic assets Long-term relationships remain a feature of the industry. in-house. Interestingly, though, a majority (52%) contracted “We tend to keep our global custodians for several years in with the same third-party master custodian/master trustee that the absence of some significant event, but we are reviewing handles their domestic activity, while 19% used a separate the relationship constantly,” says one major U.S. client. Change global custodian. does, of course occur. “We use a couple of global custodians Beyond the core services associated with administering and they tend to be long-term relationships, but we have made international assets, Figure 1 opposite indicates the additional changes in the past,” says another. services that respondents typically bought from their global Faced with the hypothetical question of which products custody provider. The first observation is that the distinction and services institutions would prioritise in selecting a new between custody and fund administration from an asset provider, the core requirements of settlement and asset manager perspective is eroding, at least as far as mainstream servicing top the list despite expansion in the breadth of mutual funds are concerned. Figure 2 lists those services requirements (see Figure 6). “We actually see our needs as that most global custodians surveyed are currently providing pretty consistent,” says one asset manager. “We have high live to at least one client, rather than simply being capable expectations across the board.” of providing. In the case of most service providers, the full Taken as a whole, clients see their custodians as having complement was being handled, the only exception in a few been reasonably responsive to the expansion in their needs. cases being transition management. (Where global custodians Over the past year, most regard the quality of service across the board as having remained stable or having improved in certain areas (see Figure 4). Delivery channels and operational “How you productise your reporting top the list of perceived improvements. By contrast, a data is always a tricky worrying minority have observed some slippage in the quality of both asset servicing and client and relationship management question, because there (see Figure 5). are many different ways of Balancing the latter with increased digitisation remains a challenge. “The attributes of a custodian are on the one hand slicing it. I would err on the being able to deliver services on a scale basis in a cost-efficient side of caution.” manner and on the other to offer high-touch quality,” says Chris Rowland, head of global custody at J.P. Morgan Chase. Kevin Lui, Citi When a client is outsourcing the safekeeping of their assets

38 globalcustodian.com Global Custodian | Spring 2015 MARKET REVIEW | GLOBAL CUSTODY

Fig 1: Services currently bought from principal provider Fig 3: Overall satisfaction levels with principal provider over the past year

Foreign exchange execution 65% Transfer agency 53% Mutual fund administration 47% Very satisfied – 39% Sec. lending or collateral management 41% Satisfied – 50% Trustee services 35% Somewhat satisfied – 6% Neutral – 0% Transition management 24% Somewhat dissatisfied – 6% Other fund adminsitration 18% Dissatisfied – 0% In-house money market funds 12% Very dissatisfied – 0% Access to third party funds 12% Performance measurement 12% Hedge fund administration 6% Prime broker services 6% Fig 4: Areas where service levels improved over the past year

Client portal / private cloud 36% Fig 2: Live services currently being provided by global custodians Operational reporting 31% Corporate action processing Foreign exchange execution 30% Contractual date income collection Securities lending 25% Proxy voting Network management & asset safety 20% Real-time reporting Data curation 20% Intra-day reporting Complex fund share classes 18% 17% Overnight reporting Asset servicing 12% 15% Management information for clients Core technology 12% 15% Agency securities lending Fees 12% 15% Third party securities lending General fund administration 6% 13% Third party collateral management Client service & rel. management 6% 13% Mutual fund administration Compliance 11% Hedge fund administration Valuations 9% Private equity fund administration Cash management 8% Real estate fund administration Attribution analysis Performance measurement Fig 5: Areas where service levels declined over the past year Transaction cost measurement Asset servicing 15% In-house money market funds Client service & rel. management 13% Third party money market funds Foreign exchange execution 10% Foreign exchange execution services Valuations 9% Prime brokerage (i.e. financing hedge funds) Operational reporting 8% Transfer agency Cash management 24% 8% Transition management

Fig 6: If you were to undertake a formal review of the services you receive, how would you rank the following in terms of priority?

Rank 1 2 3 4 5 6 7 8 9 10 Settlement 38% 31% 15% 8% 8% Asset servicing (income collection, corporate actions, proxy voting 15% 31% 8% 31% 15% Operational reporting 8% 8% 38% 15% 31% Compliance 23% 15% 8% 8% 15% 8% 15% 8% Valuations 8% 15% 8% 15% 8% 8% 23% 8% 8% Network management and asset safety 15% 15% 8% 15% 15% 15% 15% Core technology (disaster recovery, security, etc.) 8% 15% 15% 23% 31% 8% Client-facing technology (including client portal, private cloud services, etc) 15% 8% 31% 31% 15% Client service and relationship management 8% 8% 15% 15% 15% 31% 8% Other services (e.g., fund administration, transfer agency, etc 15% 8% 8% 69%

Global Custodian | Spring 2015 globalcustodian.com 39 MARKET REVIEW | GLOBAL CUSTODY

“We have clients such as family offices with assets in multiple banking organisations … [who’d] like a master data view irrespective of where the assets reside.” Mathieu Maurier, SGSS

clients such as family offices with assets in multiple banking organisations approaching us. What they’d like is a master data view irrespective of where the assets reside.” Substantial investment in data projects is likely to be on the agenda of all providers seeking to sustain or grow their global custody business. “We gather a lot of data in the course of our activities, not only on the global custody side, but in fund administration as well,” says Philippe Ruault, head of product for clearing, custody and settlement, BNP Paribas Securities Services. “We have started implementing new technologies in our front end that will allow clients to see a greater range of data.” The challenge in meeting expanding data needs will be around the world, they expect a high-touch relationship. This ongoing. Global custodians generally acknowledge that they hold is confirmed by a large global asset manager. “Though there’s huge amounts of data that are still untapped. “The challenge is to a lot of automation, we do still value personal relationships,” convert it into things that are actionable,” says one. “If we can’t she comments. monetise it in some way, it’s hard to justify the resources.” Kevin Lui, managing director, Citi Securities and Funds More data please! Services, provides a reality check. While enthusiastic about There is a consensus among both clients and providers that Citi’s innovation in this area (see page 45), he notes that, “How data management and delivery is key to maintaining client you productise your data is always a tricky question, because satisfaction levels in the future. The data required goes beyond there are many different ways of slicing it. I would err on an operational focus to include both market intelligence the side of caution. There is a question of ‘can you do it’ and and help with regulatory reporting obligations. “The global another ‘should you do it’”. n custodians we use provide market intelligence created in- house, but I do see a lot who repackage market intelligence Key to provider profile charts that they’ve bought elsewhere,” one large U.S.-based asset Client location manager observes. Europe – inc. Turkey, Russia and Israel “Global custodians have to digitalise or die,” warns one North America – inc. US and Canada Australasia – inc. All of Asia, Australia and New Zealand European client. “Of course, we will always need a way to Rest of the world – primarily ME, Africa and Latin America administer assets, whatever they may be, but the data that Asset type global custodians hold is equally important to as the asset Equities – Listed and unlisted equity securities administration services they provide. What I want is a dashboard Fixed income – Government and corporate bonds that shows my holdings, VAR, and capital flow information. Cash – Bank deposits, fiduciary deposits, etc. They should also be able to give us information on currency Other – All alternative assets; e.g., real estate, private equity, etc. movements. Longer-term, I’d like to be able to get more data Client type from our global custodians rather than market data providers Asset owners – Pension funds, family offices, etc. who don’t necessarily take responsibility for accuracy.” Asset managers – Mutual funds (open- and closed-end), OEIC/SICAVs, ETFs “We do see a trend coming,” says Mathieu Maurier, global Governments – Sovereign wealth funds, central bank assets, etc. head of sales and relationship management, Société Générale Other – e.g., escrow assets Asset location Securities Services (SGSS). “Data is a raw material; it’s what you Domestic assets – Assets listed & held for clients in same country do with it that’s important.” In addition, says Maurier, clients Cross-border assets – Assets listed & held for clients not in the same country are looking to connect up disparate data sources. “We have

40 globalcustodian.com Global Custodian | Spring 2015 MARKET REVIEW | GLOBAL CUSTODY

Provider profiles

n previous years, the Global Custody Survey has included a growing importance of data to the overall product offering. Itable for each service provider, ranking client perception by “Data – with no adjective – is really the pivot,” says John service area. As we explain at the beginning of the market Lehner, CEO, BNY Mellon Technology Solutions. “Custody has review, we decided that the time had come to revisit our often been closely linked to accounting. That is only a subset approach this year by taking time out to explore the global of the necessary information. Now we as an industry have to custody landscape. take a data-centric view.” In so doing, we chose to target a specific segment of top-end We do not draw any conclusions about the future clients for input with the aim of producing an aggregate view competitive landscape for an industry that has witnessed of how their requirements are being met. significant consolidation, most of which pre-dated the turn At the same time, we offered global custodians the of the century. As Mathieu Maurier, global head of sales and opportunity to describe how their business was changing relationship management, SGSS, observes, “If you look at the and to complete a data snapshot of their present client base. top 10 in 2001, the list today is more or less the same, barring Where this has been provided, in whole or in part, it populates the merger of BNY and Mellon, but that doesn’t guarantee the data table accompanying each profile. Where the data is they’ll all be there for the future.” missing or regarded as confidential, we have not attempted On the operational side, the impact of the launch of T2S in to reconstruct it, leaving providers to judge what they wish to a few months’ time is still to be determined. “T2S is not top put in the public domain. We have, however, provided where of mind for clients,” Wood acknowledges, “but for the last 18 possible an estimate of total assets under custody, based on months, I have yet to be in a meeting when it hasn’t come up public domain sources. The list of providers profiled in not in one form or another.” exhaustive, but focuses on the largest banks whose clientele is There are changes in the way many of us are organised, but drawn from multiple jurisdictions. for the most part we still have the same group of competitors If there is one common thread through the profiles, it is the and are evolving at a similar pace. n

BNP Paribas

NP Paribas Securities Services has offices in 34 markets, Provider profile B26 of which provide local custody as part of a network covering 102 global markets. The bank estimates that 90% of the assets administered for clients are held in its name at $bn % an infrastructure level. In addition to all the services listed Total assets in custody 9,180 100 Client location on page 39, the bank adds the following as being currently Europe 7.565 82.4 provided live: Trade reporting for OTC derivatives (EMIR North America 318 3.5 reporting); AIFMD Annex IV reporting; OTC independent Australasia 204 2.2 valuation; Margin optimisation; Cash sweeping/zero balance Rest of the world 1,093 11.9 arrangements; Overnight deposits; Bridge financing for Asset type alternative funds (including private equity and real estate Equities – – funds); Passive overlay; Dealing services (dealing desk Fixed income – – outsourcing); Fund dealing services. Cash – – The bridge financing service for private equity and real estate Other – – funds was launched in December 2014, providing fund manager Client type clients of the bank with committed credit lines. An outsourcing Asset owners – – Asset managers – – service for AIFMD reporting was introduced in October. The Governments – – same month saw the launch of an integrated broker-custodian Other – – solution to help investors and asset managers access the Asset location Shanghai-Hong Kong Stock Connect (Stock Connect) initiative. Domestic assets – – BNP Paribas cites depositary banking services, data navigation Cross-border assets – – and analysis and collateral management as the three services showing the strongest growth in demand over the past year. n

Global Custodian | Spring 2015 globalcustodian.com 41 MARKET REVIEW | GLOBAL CUSTODY

Brown Brothers Harriman

rown Brothers Harriman is a privately held financial Provider profile Binstitution that provides global custody from within its Investor Services business. It appoints multiple non-captive, sub-custodian banks in close to 100 markets. The bank itself $bn % operates in seventeen global locations, including Beijing, Total assets in custody 4,010 100 Boston, Charlotte, Chicago, Denver, Dublin, Grand Cayman, Client location Hong Kong, Jersey City, Krakow, London, Luxembourg, New Europe 1,444 36 North America 2,030 51 York, Philadelphia, Tokyo, Wilmington, and Zürich. In addition Australasia 447 11 to the services on page 39, the bank lists technology consulting Rest of the world 89 2 and markets monitoring as live offerings. Asset type BBH identifies the strongest growth in service demand over Equities 2,529 63 the past year as being in the areas of cross-border fund services, Fixed income 1,129 28 alternative asset services and ETF services. As of March 2014, Cash 73 2 its assets under custody and administration included $248 Other 279 7 billion of ETF assets. Other areas where BBH is experiencing Client type growing demand would include collateral management, added Asset owners 1,383 34 transparency requirements and technological integration with Asset managers 2,601 65 client systems, particularly as clients expand into a broader range Governments – – Other 26 1 of products or geographies. Recent examples have included US Asset location managers seeking to become more engaged with UCITS and Domestic assets 1,414 35 asset managers looking to develop their ETF business. Cross-border assets 2,596 65 BBH has also developed its multi-year tax support services as well as a distinct product to assist with FATCA compliance. n J.P. Morgan

.P. Morgan (still known by many as J.P. Morgan Chase in Provider profile Jthe securities services space) was arguably the first bank to offer a product called ‘global custody’ in one of its previous incarnations (see page 36). Today, global custody comes under $bn % the bank’s investor services umbrella, which incorporates Total assets in custody 20,600 100 Client location agency clearing, collateral management and execution services, Europe 5,900 29 custody and fund services and financing and prime brokerage. North America 12,700 62 Through 25 regional technology, operational and customer Australasia 1,400 7 service centres, the bank provides a full range of custody and Rest of the world 500 2 securities servicing products across all time zones. Recently, Asset type J.P. Morgan has seen client demand increasing for services Equities 6,500 32 related to new market activity, such as Stock Connect between Fixed income 12,300 60 Shanghai and Hong Kong as well as other markets opening to Cash – – foreign investment. Other 1,700 8 From a specific custody perspective, the bank describes Client type demand for its product range as fairly constant, though with asset Asset owners 2,600 13 Asset managers 9,100 44 safety top of mind for an increasing number of clients. It maintains Governments 3,200 16 an informal division between asset owners and asset managers Other 5,600 27 from a servicing perspective, with hedge funds as an identifiable Asset location client segment within the broader investor services group. Domestic assets 10,800 53 Across the custody and fund services business, the bank Cross-border assets 9,700 47 identifies a strategic objective of moving from being a report- centric organisation to a data-centric organisation. n

42 globalcustodian.com Global Custodian | Spring 2015 MARKET REVIEW | GLOBAL CUSTODY

Northern Trust

orthern Trust provides core custody services from a Provider profile Nnetwork of offices in 22 global locations in 20 countries in Europe, Middle East and Africa, North America and the Asia- Pacific region with clients domiciled across 46 countries. $bn % The bank’s primary regional asset-servicing processing Total assets in custody 5,969 100 centres are located in London, Chicago, Bangalore and Manila. Client location Europe 1,747 29 It provides fund administration and transfer agency services North America 3,073 51 from London, Luxembourg, Guernsey in the Channel Islands, Australasia 493 8 Dublin and Limerick in Ireland, Bangalore and Melbourne. Rest of the world 140 2 Other offices are located in Australia (Melbourne) China Asset type (Beijing), Canada (Toronto), Germany (Frankfurt), Guernsey, Equities 2,695 45 Hong Kong, Ireland (Dublin and Limerick), Japan (Tokyo), Fixed income 2,165 36 Luxembourg, Malaysia (Kuala Lumpur), Netherlands Cash 375 6 (Amsterdam), Saudi Arabia (Riyadh), Singapore, South Korea Other 734 12 (Seoul), Sweden (Stockholm), United Arab Emirates (Abu Client type Dhabi) and the US (New York). Asset owners 2,233 37 In addition to the services listed on page 39, Northern Trust Asset managers 1,067 18 Governments 1,467 25 provides pooled fund and hedge fund execution, as well as Other 686 12 administration for property holdings and infrastructure as part Asset location of its alternative assets services. Domestic assets – – Over the past year it points to tax-transparent fund structures Cross-border assets – – in the UK as a major innovation and sees a significant business developing in these new structures. n RBC Investor & Treasury Services

BC I&TS delivers custody services across 87 global markets Provider profile Rand fund administration services across 13 markets. It has a particular global strength in transfer agency. The bank provides custody and fund administration from offices in Australia; $bn % Belgium; Canada (multiple locations); Hong Kong; USA; France; Total assets in custody 3,200 100 Client location Ireland, Italy; Luxembourg; Spain; Singapore; Switzerland; Europe 1,700 53 and United Kingdom. Of the services listed on page 39, it is North America 1,400 44 currently not providing management information for clients, Australasia 100 3 in-house money market funds or transition management to Rest of the world – – existing clients. Over the past year, RBC has experienced the Asset type biggest growth in demand from clients for services in the area Equities – – of shareholder/distribution services, followed by private equity Fixed income – – and real estate servicing, and foreign exchange. Cash – – In the same period, the bank has committed significant Other – – investment to client-focused technology solutions. RBC I&TS Client type is an AIFMD-compliant depositary, providing alternative Asset owners – – Asset managers – – fund managers with safekeeping, oversight and cash-flow Governments – – monitoring services. It has continued to evolve its depositary Other – – capabilities in Europe for oversight of alternative investment Asset location funds, especially debt funds, private equity and real-estate Domestic assets – – investment vehicles. In Asia, the bank has introduced a mutual Cross-border assets – – market access programme for clients considering trading through Shanghai-Hong Kong Stock Connect. n

Global Custodian | Spring 2015 globalcustodian.com 43 MARKET REVIEW | GLOBAL CUSTODY

Société Générale Securities Services

ociété Générale’s core custody locations include Bulgaria, Provider profile SCroatia, Czech Republic, Poland, Romania, Russia, Serbia (local custody), Slovenia, France, Germany, Luxembourg, Ireland, Italy, Spain, Switzerland, Ghana (local custody), Ivory $bn % Coast (local custody), Morocco, South Africa, Tunisia and Total assets in custody 5,121 100 India. It provides fund administration out of France, Germany, Client location Europe – – Ireland, Italy and Luxembourg North America – – In addition to all the services listed on page 39, SGSS is Australasia – – also providing loan fund administration and cash investment Rest of the world – – solutions to global custody clients. Asset type The bank has recorded particular growth in demand for Equities 463 9 alternative fund services, including depository services (cash Fixed income 3,720 73 flow monitoring, safekeeping of assets, control and oversight), Cash – – fund administration solutions (NAV calculation, reporting Other 938 18 services), and distribution services (company administration, Client type assistance in obtaining passport, and distribution support). Asset owners 973 19 The second biggest growth area was services for derivative Asset managers 1,849 36 products following EMIR implementation. Governments – – Other 2,305 45 Among new products and services introduced by SGSS Asset location over the past year were an AIFMD reporting package, a Domestic assets 1,737 34 Solvency II solution, an integrated service to support clearing Cross-border assets 3,385 66 and processing OTC derivatives, and a UCITS management company for asset managers. n State Street

tate Street regards global custody as a discrete product Provider profile Srather than a discrete business. In terms of client wish lists, the bank recognises a trend in requests for custodians to look $bn % beyond traditional safekeeping to focus on enhanced access Total assets in custody 28.188 100 to custody data. The bank also foresees a greater role for Client location custodians in the newly found need for liquidity. Europe 5,633 20 To help address these needs, the bank last year launched North America 21,217 75 GX Investment Labs, a suite of interactive applications Australasia 1,338 5 encompassing three new portals, each with a distinct focus: Rest of the world – – dynamic risk management, liquidity modelling, and asset Asset type allocation. In December the bank added the GX Private Equity Equities 15,876 56 Index Portal, which allows clients access to State Street’s Fixed income 8,739 31 private equity universe with the ability to design custom Cash – – benchmarks and perform manager peer comparisons. Other 3,573 13 In June, meanwhile, the bank introduced GASB 67 Client type Asset owners – – Performance Reporting to help US public funds meet the new Asset managers – – GASB 67 performance requirements. Governments – – In addition to the services listed on page 39, State Street cites Other – – money market products, including repurchase agreements, Asset location US dollar and foreign currency time deposits, certificates Domestic assets – – of deposit, treasury bills, commercial paper and discount Cross-border assets – – notes among the cash management services it is currently providing. n

44 globalcustodian.com Global Custodian | Spring 2015 MARKET REVIEW | GLOBAL CUSTODY

BNY Mellon Citi

NY Mellon’s global custody clients fall into one of the iti’s global custody offering is provided under the umbrella Bfollowing major categories: asset owners (pension funds, Cof its Markets and Securities Services division. It has long sovereign wealth funds); asset managers; alternative asset been distinguished by its extensive use of its own branches to managers (for example, single manager hedge funds, fund of provide sub-custody. The bank estimates that its 62 proprietary funds, private equity funds, real estate funds), banks; broker branches cover over 95% of the world’s market capitalisation. dealers; and insurance companies. It lists two recently introduced flagship initiatives as The bank offers core custody and fund administration leveraging that proprietary network. The first, Network Direct, globally and participant record keeping in the US. Of the list gives clients direct access through an app to dashboards of of live services on page 39, only transition management is not local market information, including assets under custody, cash, currently being provided to any clients. lending positions, etc. as well as an assessment by in-country The areas of largest growth in client demand over the past teams of the infrastructure for each market. Users are able to year have included alternative investment servicing, ETF send a query or arrange a live video conference through the and structured products and outsourcing. The bank notes a app direct with local representatives. The service is currently particular increase in interest in extending outsourcing from the being offered to the bank’s “top platinum clients.” back- to the middle office. The second initiative Integrated Custody Engine (ICE) aims The past year has seen the introduction of dedicated to refashion the traditional global custody model by collapsing managed accounts, through the acquisition of HedgeMark Real the operating infrastructure between global- and sub-custodian estate and infrastructure fund administration services, GASB so that where possible transactions are processed once 67 Financial and Performance Reporting Solutions, enhanced only, using the same SMAC system, while still maintaining LDI Reporting in partnership with Redington Eagle Investment the integrity of the client’s books and records. Cut-off times Systems. It has also introduced a reference data suite in for those markets where ICE is operative are consequently collaboration with Interactive Data to help European insurance improved. n companies meet Solvency II compliance requirements. n HSBC UBS

SBC’s global custody business forms part of its securities ver the past decade, UBS has expanded its service Hservices division along with fund administration, sub- Ofor financial institutions beyond custody to include custody and clearing, and corporate trust and loan agency. what it calls “the whole front-to-back chain.” Business has Its global client base includes asset managers, insurance consequently expanded among financial institutions. The bank companies, pension funds, sovereign wealth funds, banks and estimates that it currently holds some SFr 300 billion ($298 reserve managers billion) in global custody for financial institutions – a six-fold The bank sees the largest growth in demand in two areas. increase over the past decade. The client base for this offering The first is enhanced reporting to meet regulatory compliance consists largely of small-to-medium-sized Swiss banks, though requirements, moving beyond purely transaction-related it is also popular among Scandinavian clients. information. The second is help to minimise IT investment by At present, many of these banks handle their Swiss securities outsourcing components of the middle office rather than an “all servicing business themselves. UBS expects this to change as or nothing” outsourcing deal. the domestic market becomes more complex. In the past few In order to meet AIFMD depositary obligations, HSBC months, it points out, a number of Swiss banks have added has created a separate team and function independent from their domestic business to their existing cross-border custody its custody operations to provide independent oversight relationship. independent oversight and compliance reports. On the institutional investor side, UBS has seen an increase In response to the launch of the Shanghai-Hong Kong Stock in the number of family office clients as that segment moves Connect programme in late 2014, HSBC is offering its Custody beyond wealth management to professionalise its custody Plus platform as an integrated execution, custody and clearing operations. and foreign exchange platform. In common with many of its peers, the bank is seeing a In Europe, the bank anticipates significant impact on growing desire among clients for more accessible data. The collateral services from the launch of TARGET2-Securities (T2S) bank has launched a new performance risk analytics tool that and the introduction of CCPs for derivatives. n brings information into a dashboard format. n

Global Custodian | Spring 2015 globalcustodian.com 45