GLOBAL - Custodian and asset management JP Morgan is moving into new areas of custody-related investor services covering private equity and fund of hedge funds, on the back of client demand from pension funds.
Benjie Fraser, head of UK pensions and charities for JPMorgan Worldwide Securities Services' Securities Company, told IPE he is seeing increasing requests from European pension funds for additional support services to their traditional custody offering, as funds are moving into these types of investments but need the necessary flow of regular investment data to accompany their decisions.
JP Morgan is widening its remit to supply custody and performance data on alternative investments, securities and over-the-counter derivatives (OCTs), but the firm has decided to limit its role somewhat, even though its role as "trusted record keeper has been amplified", said Benjie, and the firm is increasingly "pushing against the role of the consultants" because pension funds are beginning to ask not just for regular data on specific investments, but have sought to ask which funds they should be investing in.
It's a role officials are not willing to consider at present, said Fraser, nor is JP Morgan looking to shift into a fiduciary manager role.
However, with the growth of private equity and hedge fund of funds, JPM is now opening its services to provide custody-like support and access to its software.
"We are custodians of the information. There is no plan to us to go beyond that. But pension fund officials want to have regular meetings about derivatives, for example, and want to know about their exposure to our operation through OTCs. We do not quite want to be the fiduciary manager, but trustees have asked. We want to be a strong project manager under the custody and accounting," said Fraser,
"We are perhaps moving into hedging portfolios custody, including passive overlay, as seen with the earlier West Midlands mandate win. We are also looking at delivering private equity fund administration. [Pension funds] build up a lot of partnerships, but they couldn't possibly cope with the paperwork so they are asking to use our software to outsource that.
He continued: "It allows use to start a relationship where we don't do [the pension fund's] custody."
One other area now being investigated by JP Morgan is the delivery of real estate custody information to European investors, added Fraser, though this is at a very early stage and currently only available through its US operations.
"The likes of USS and charity Wellcome Trust have property portfolios, and they want someone to handle the custody of property. We are in an early stage of work to provide real estate custody data, similar to that supplied for private equity. While it is difficult to value property, there are lots of OTCs we can now value," he added.
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