Custodian of the year: BNP Paribas

Asia Risk Awards 2020

When one of China’s largest offshore asset managers, CSOP Asset Management, decided to open an office in Singapore at the end of last year, it needed a bank that could help it with a full range of custody solutions: from fund administration to transfer agency services. BNP Paribas Securities Services was able to oblige, offering a level of service that its rivals couldn’t match.

“As an asset manager, one of the most important things to us is to find a custodian that can deliver its services as a single firm,” says David Ng, chief operating officer of CSOP. “With BNP Paribas, we were exposed to the full capabilities of the bank, which we could then draw on to support the products that we are launching for our investors.”

CSOP’s decision to open shop in Singapore was precipitated by a significant amount of private wealth flowing out of Hong Kong in the direction of the city state. The move also hinged on a new variable capital company structure, which the Monetary Authority of Singapore introduced in pilot phase at the start of last year, and has since rolled out to the whole market this year.

This structure provides funds with greater flexibility to manage their business, including the ability to redeem shares without seeking shareholder approval and permitting investors to enter and exit their investments whenever they want to.

“BNP Paribas has demonstrated the ability to be very flexible and very quick, and we were able to launch the new fund structure in just four weeks. A typical desk would take about two months to launch a new fund,” says Ng. “BNP Paribas may not as big as their peers, but what they offered me was a quick time to market, supported by a global hierarchy and a local network.”

BNP Paribas has demonstrated the ability to be very flexible and very quick, and we were able to launch the new fund structure in just four weeks. A typical desk would take about two months

David Ng, CSOP Asset Management

BNP Paribas’s rapid response to client needs has become a hallmark of its franchise, and is largely thanks to the close collaboration between the bank’s global franchise and its expanding local network.

“Although we are a European bank with global expertise, we also have a large sub-custodian network, so we can leverage off our branches in different countries. It is that local custody setup that brings real value to our clients,” says Angely Yip, BNP Paribas’s head of sales and relationship management, north Asia.

The bank has been able to help clients with similar fund structures in other jurisdictions, too.

In 2018 Hong Kong launched its own open-ended fund company (OFC) regime, which was also designed to provide greater flexibility for fund managers within its jurisdiction, by allowing them to be structured as a company, rather than as a unit trust, which can have more onerous requirements and face additional obstacles when it comes to repatriation of funds.

In May this year, BEA Union Investment Management became the first fund manager to use the OFC regime for an actively managed retail fund. It appointed BNP Paribas Securities Services to provide a range of custody services, including fiduciary duties, fund administration and transfer agency services.

Angely Yip, BNP Paribas

Yip says that one of the key things that BNP Paribas was able to bring to the table in winning the BEA Union mandate was the ability to support the fund manager in its future global expansion. Over the past year, the custodian has been able to help the firm passport some of their Hong Kong-domiciled unit trusts into Switzerland under the Mutual Recognition of Funds scheme.

“BEA Union needed a service provider that was able to support their global expansion strategy,” says Yip. “We can look across multiple jurisdictions, and help the clients understand the different regulations and challenges that they may be facing.”

This determination to look for the value-add for its clients has served BNP Paribas Securities Services well on many fronts – not just with the examples given – and has helped the firm win business from rivals.

According to Luc Renard, head of financial intermediaries for the Asia-Pacific (Apac) region, BNP Paribas Securities Services saw an 18% increase in revenue in Asia, with a more than 10% increase in assets under custody. This was in spite of a challenging business environment, characterised by increased competition and pressure on costs, he says.

Early signs are that 2020 will be good year, too, with settlement volume growing by 64% in the first half – although a fair amount of that may be explained by the massive volatility that has been sweeping the market.

ESG push

The French bank is also proud of its focus on environmental, social and corporate governance (ESG) goals.

Michelle Cockrill, head of marketing for BNP Paribas Securities Services, Apac, explains: “As a bank, we are committed to sustainability – and given today’s environment, this is very important.”

BNP Paribas Securities Service is still the only custodian that has signed up to the United Nations’ principles for responsible investing, and, as a bank, BNP Paribas has been carbon-neutral since 2017. One innovation that has come out of this ESG stance – and is now being appreciated by Asian investors – was developed back in 2015: an ESG reporting analytics tool, so asset managers and asset owners can develop an ESG-compliant portfolio.

“These efforts to support a sustainable future demonstrate our ability to help our clients on their sustainability journey, which is even more important in the wake of the Covid-19 pandemic,” says Cockrill.