GERMANY - The leading public pension fund in Germany, Versorgungswerk des Bundes und der Lander, or VBL, has mandated market leader Universal Investment to act as its Master KAG and BNP Paribas Securities Services as the global custodian.
The fund has over seven billion euros in assets, 1.9 million active participants and one million retirees. The Karlsruhe-based VBL will use the services of 13 international investment managers, under the Universal master KAG umbrella structure.
BNP Paribas says it was selected because of its internet-based daily performance measurement and reporting capabilities, both of which are being provided to the client in German.
This mandate from VBL is one of four pension fund mandates won by BNP Paribas with a total asset value of over ten billion euros, within the last six months. The group now has 150 billion euros of assets under custody in Germany.
BNP Paribas says that the custody market for pension funds in Germany is changing fast. “This is particularly with the move to master KAGS and the ability to use this structure to employ a wider range of international asset managers, through Spezialfonds,” says Dietmar Roessler of BNP in Frankfurt, where the bank employs over 150 in securities services.
“We find customers want not just local language reporting, but also to have fund accounting locally,” he says, where over 30 staff are now on the Depotbank/global custody side. On this basis, the group is providing an internet-based reporting service, incorporating performance measurement.
“For Spezialfonds, extensively used by pension funds, we calculate net asset value each day and this allows our clients to receive performance on a scheduled or ad hoc basis over the internet.”
He added: “We can provide all the full blown risk analysis that our clients want, such as value at risk, stress tests as well as the other analytical services such as transactions cost analysis and commission recapture.”
Rossler believes that the German market has developed very quickly in terms of the services expected from custodians. “This is now a sophisticated market. In some ways, the Myners Report has had as much impact in Germany as in the UK.”
German funds are questioning their existing arrangements, looking for separation of functions as well as lower fees. “This is in line with the MasterKAG development, which is changing relationships in the market.”