Australia's funds flow for JPMorgan
As one of the world’s four largest retirement savings markets and the most competitive funds management centre in the Asia Pacific, Australia has become a major regional hub for international custodians such as JPMorgan investor Services.
JPMorgan has three major custody processing hubs in the world, and Australia is one of them. Bases in Australia, the UK and US provide support for the majority of the more than 1,800 customers and US$7 trillion in assets held by the bank, a top-three global custodian.
“Even in these days of advanced technology, we still need people in the correct time zone to support our regional sub-custodians in trade matching and reconciliations,” says Laurence Bailey, Senior Vice President and Asia-Pacific Regional Business Executive, JPMorgan Investor Services.
“Basing our outsourcing hub for Asia in Australia works very well and ensures we serve our customers and develop our relationships as best we can. Australia has a mature infrastructure, is politically stable and has a well educated and multicultural workforce, including sizeable Chinese and Japanese speaking communities,” he says.
Australia also offers lower risks for processing complex transactions compared to popular outsourcing destinations such as India and China, but with relatively low costs compared to other Asian financial centres.
“The underlying infrastructure is as advanced as anywhere in Asia, including strong settlements platforms with several tailor-made for custody,” Mr Bailey says.
“Other Asian centres don’t yet have a high level of cross-border investment, so they would not be appropriate destinations for a custody hub.
"Australia also has a robust regulatory regime so there is less risk in running operations here,” he says.
“The firm also moved its regional equity processing to Sydney, after looking at India, Singapore and other markets,” Mr Bailey adds.
JPMorgan investor Services employs more than 7,000 staff worldwide and is part of the J.P. Morgan Chase & Co global financial services group, with 90,000 staff in some 60 countries.
With more than 700 investor Services staff throughout the Asia-Pacific, JPMorgan services clients from India to New Zealand. Outside Australia, Mr Bailey is responsible for centres of excellence in Hong Kong, India, Japan, Singapore and Taiwan.
“Australian institutional investors have a culture of diversification and cross-border investment, which makes Australia an attractive market for global custodians,” says Bailey.
“Institutions such as the State Government and Commonwealth superannuation funds, and Westpac’s BT in the private sector, are large, complex, have considerable international exposure and use multiple managers,” he says.
Full range of custody services
JPMorgan Investor Services offers a full range of custody services in Australia, from master custody to unit pricing, including fund administration, settlement, performance reporting and accounting.
“Australia is a sophisticated investment market and at the leading edge in many areas such as the use of derivatives and other new asset classes,” Mr Bailey adds.
The bank is the second largest custodian in the country with A$180 billion in client assets, including A$146.5 billion in domestic and A$50.6 billion in global assets. It employs more than 500 staff at operations in Sydney.
JPMorgan has found a welcoming attitude to foreign investment in Australia. The bank has offered global and domestic custody services in Australasia since 1986 and master custody since 1991.
“JPMorgan investor Services saw it was important to have operations in Australia as there is a considerable pool of investment in domestic assets requiring expertise on the ground to provide complete custody services,” says Mr Bailey.
Australia is backed by a strong tertiary education system and universities have been willing to offer courses that help students find work with JPMorgan.
“We’re working with the universities to refine courses. They have been very helpful and took the initiative in contacting us. We think there are significant opportunities for more cooperation,” says Mr Bailey.
While there is strong competition in the Australian custody market, Mr Bailey thinks global consolidation in the industry, as well as Australia’s inherent benefits, will continue to drive growth.
“Australia is at the forefront of custody outsourcing and Asian clients are showing increasing interest. Other custodians are considering operating outsourcing services in Australia because international fund managers normally have regional offices here,” he says.
Custodians are also assured of a strong market by Australia’s compulsory, employer-funded national retirement policy.
“The Australian government practises what it preaches in superannuation. It is very advanced in the design of its defined contribution policies, giving investors more choice in the investments they select to fund their retirement,” says Mr Bailey.