GERMANY – Global custodian JP Morgan Investor Services (JPMIS) says it had a bumper year in the German marketplace in 2002. Assets for which it acts as depot bank and custodian doubled to 40 billion dollars (37 billion euros) during the year, with total client assets under custody increasing to 80 billion dollars.
Arnulf Manhold, business executive, JPMIS, in Frankfurt, reckons that the need for global custodians has grown in Germany, particularly in relation to the Spezialfonds business development. With the growth in use of the Master KAG structure, institutional investors are increasingly using international investment advisers along with a global custodian and just using the local depot bank for administration.
"This trend to greater flexibility in the funds market benefits us," he says. The majority of the new 20 billion dollar depot bank related business that JPMIS won was for clients looking for Master KAG arrangements.
Manhold believes that fewer and fewer of the domestic custodians in Germany can cope with the reporting requirements for Spezialfonds KAG business, which the international custodians now handle routinely. All the new business was transitioned in December of last year. "This involved a lot of extra work," he says. The staff numbers were increased to 80 in Frankfurt.
The other 20 billion dollars under custody comes from a number of sources, It includes large corporate clients who use global custodians for direct investments and makes up to around 7 billion dollars in assets. "We also act as the global custodian for the Deka Bank, for assets in public funds and Spezialfonds outside Germany, plus the business of a number of the smaller bank groups."
The wins in 2002, included five unidentified major corporates, much of which was for depot bank business for their sub-advisory depot business.
Looking forward, Manhold believes there is still a huge volume of assets available to the international custody groups, with JPMIS very well positioned to win this, with State Street preoccupied, in his view, in acquiring the Deutsche Bank business. BNP Paribas has still to make its mark on market as a relative newcomer without a long track record. "We have a lot of requests for proposals in the pipeline. The outlook for the German market is very exciting," he says.