Spread of global custody to Europe
Hugh Wheelan monitors pension funds' reactions
European pension funds, anxious to consolidate fund information and facilitate reporting and auditing processes are increasingly finding a use for the services of a global custodian.
Didier Wattelle, risk manager and pension fund adviser for IBM France, describes the company's transition, the first of its kind in France, from individually arranged custodianship for its seven profit-sharing funds to an overall global custodian as difficult, but ultimately successful and absolutely invaluable". The move was made to escape some of the difficulties of information access and transparency that had arisen with the previous management groups, which were very closed in their custody style.
"We chose Credit Agricole Indosuez for the role because they met our criteria on all levels, those of effective information transmission, adherence to French regulatory constraints and cost. The custodianship change did not run completely smoothly from the start. We did encounter certain teething problems in our working relationship in the first six months, but that was to be expected. Everything is running perfectly now."
He adds that the global custodianship gave IBM suppleness in both information access and independence, meaning that fund management arrangements could now be changed relatively easily. "Our management fees have been reduced by about a third as well, and we now feel a sense of information and administration harmony within the company, which we didn't have before."
The decision by Tate & Lyle to switch its information and accounting procedures out to Bankers Trust as global custodian was also prompted by a need for ease and transparency.
"Previously we had a full replication of all our records in the pensions department, which was becoming an incredible burden," explains Peter White, director of group pensions. "We were looking for a global custodian from whom we could gain on-line access to all records as and when required. Bankers Trust, who were already acting as custodians to one of our managers, fitted the bill."
The relationship is working extremely well, with the global custodian responding quickly to any problems that have arisen, White says. Global custodianship had also reduced administrative costs and led to a slight reduction in personnel levels needed. "The possibility in the future for a development in the services of Bankers Trust with us is strong, but for the moment we are making sure everything is up and running to our satisfaction."
For Glaxo Wellcome it was the "basic core custody arrangements of holding title certificates and the collection or passing over of dividends," which needed to be precise and correct, prompting its choice of RBS Trust Bank as global custodian. The company had planned to take a global custodian on board since 1996, with the final deal being made in January.
"We wanted the benefit of consolidated reporting for these arrangements and felt that the work of RBS in custodianship was as good as any, if not better. We haven't been disappointed. RBS have been very helpful and obliging in their work and extremely eager to please in information accounting and presentation," says Richard Gregory, finance manager at GlaxoWellcome.
With about 50% of its equities portfolios being managed outside the Netherlands and a further appointment of two European fund managers alongside two in the US, Nedlloyd Pensioenfonds also took the step of appointing a global custodian to consolidate the reporting of its diversifying assets. "We needed the necessary auditing and reporting skills to manage our Dfl2.5bn fund on a global scale, says managing director Thon Zimmerman. "Having looked at about eight different custodians, with Towers Perrin acting as consultants, we chose The Bank of New York in conjunction with the specialist Dutch Kas Associatie, because they offered these abilities at the most cost-effective level for us. Since their appointment we have been very happy with the service provided, and look forward to this continuing.""