Swedish giant AP1 applies stringent conditions in global custodian search
EUROPE - Sweden's SEK181bn (€19.4bn) Första AP-fonden (AP1) is in the process of reviewing its custody arrangements and will set more stringent operating conditions for all applicants.
Global custodians must have a long-term credit rating exceeding an A/A1 or A rating, and have been rated by S&P, Moody's or IBCA. They will also need to demonstrate they have no less than $1trn (€760bn) in assets under custody.
AP1 will allow the winner to appoint sub-custodians, but itself does not want to deal with more than one.
The successful applicant will also be required to protect the fund against any potential loss of securities if a sub-custodian becomes insolvent.
It will need a European - although not Swedish - operations centre, and be open for the same hours as the MSCI All Country World index.
Further, AP1 wants to know the number of each applicant's clients, divided into bands from less than $10bn (€7.3bn) to $30bn-plus.
The number of Nordic clients will also need to be revealed, including local Nordic assets, as well as those external to the region.
SRI filters will also need to applied to an investment portfolio run by internal as well as 15 external managers.
Real estate, private equity and hedging strategies are all included in the overall portfolio.
AP1 does not disclose the identity of its custodians, but JP Morgan and Northern Trust, which is already custodian to AP3, are likely to be among the contenders, as are Citi, State Street, which provides custody services to AP2, and Bank of New York Mellon.