The latest Crown Financial Institution (CFI) custodial competition has ended in victory for the incumbent.
Following a tender process launched in the middle of last year, JP Morgan was reappointed this month as custodian of the $4 billion Government Superannuation Fund (GSF) and the roughly $2 billion National Provident Fund (NPF) – both managed by Crown-owned entity Annuitas.
According to Annuitas chief, Simon Tyler, the tender attracted six bids with usual suspects BNP Paribas, Northern Trust and State Street understood to have been in the mix.
Tyler said the decision to retain JP Morgan came after a thorough review of bids aided by global consultancy firm Thomas Murray.
“We were very happy with the process,” he said. “It’s a good outcome that will see only minor changes [to the custody offer].”
Last year JP Morgan also won the bigger prize as custodian of the $30 billion plus Accident Compensation Commission (ACC) fund in a role it previously shared with Northern Trust.
Tyler said ACC provided valuable advice to Annuitas during the custody tender process.
He said the review identified “slight differences” between the custodians up for the role but not enough to prompt a change of providers.
“We would’ve changed if there was a significant advantage in it,” Tyler said.
While the CFIs have been encouraged to share some operational services, he said there was no pressure to appoint a single custodian across all the major government-owned funds.
Northern Trust is currently custodian of the other large CFI, the approximately $30 billion New Zealand Superannuation Fund (NZS).
“It wasn’t a high priority to have the same custodian [as NZS],” Tyler said. “In fact, there’s a good argument for having a different one.”
However, he said the CFIs do “share a lot of expertise and ideas”.
Treasury has also appointed PwC to conduct the regular five-yearly review of the GSF operations, Tyler said. GSF was last reviewed by National Australia Bank-owned investment consultancy firm, JANA, in 2011.
In 2014 the US-based consultant Promontory published a similar five-year statutory report on the NZS.
PwC was scheduled to publish its GSF report before the end of June, Tyler said.
The GSF was established as a defined benefit scheme in 1948 to help fund the retirement of state sector employees before closing to new members in July 1992.
In 2001 the GSF shifted from investing solely in NZ fixed interest instruments to a diversified portfolio managed by Annuitas to help offset the government pension liability, which is currently more than $9 billion over and above the $4 billion or so assets held by the fund.
Annuitas also manages money for the $2 billion NPF, a group of industry-based retirement schemes with returns guaranteed by the government.