Citibank named custodian of GSIS’s $1-B global fund

The Government Service Insurance System (GSIS) has named Citibank, N.A. as the global custodian of its $1- billion fund to be invested abroad as part of its Global Investment Program.

Citibank, a New York-based financial services company, will be in charge of safekeeping GSIS’s assets which are intended for global investments.

GSIS president and general manager Winston Garcia said Citibank will minimize sub-custodian risks and provide the fund manager with local market knowledge.

“This will result in timely communication of market changes, better control over operations and client service quality and fast inquiry or problem resolution,” Garcia said.

Citigroup, Garcia added, was chosen for its extensive network, spanning 47 of the 86 markets covered by its global custody infrastructure.

This means that GSIS’s assets will be kept within Citibank’s own branches or subsidiaries, he said.

For his part, Citibank country officer Sanjiv Vohra said the company is looking forward to working with GSIS.

“We look forward to supporting GSIS in achieving its financial objectives and being its partner in serving the highest interest of its members,” he said.

Other companies that were considered as global custodian for the GIP include State Street Bank and Trust Co. and JP Morgan Chase N.A. (Hong Kong).

The GSIS recently awarded to ING Investment Management and Credit Agricole Asset Management (Singapore) Ltd. the mandates for the GIP.

ING and Credit Agricole will manage funds starting at $300 million each.

The fund managers are given the flexibility to determine their investment strategy, both in the asset allocation and the instrument selection.

They are, however, required to comply with the absolute return requirement of an eight percent floor limit in annual return on investments (net of fees) and a ceiling of seven percent on the portfolio volatility.

Among the other asset managers that contended for the GIP include BNP Paribas, Credit Suisse Asset Management Ltd., Deutsche Asset Management, Northern Trust Global Investment, Pacific Investment Management Co., Goldman Sachs and Societe Generale.

The $1-billion budget for the GIP is equivalent to approximately 12 percent of the total loans and investment portfolio of GSIS.

The GSIS said it decided to invest abroad so that it can meet the future claims and benefits of its members.

The program is also consistent with the good investment practices of public pension funds like the California Public Employees’ Retirement System and the California State Teachers’ Retirement System, GSIS also said.