PARIS - AXA-UAP Group is seeking a combination of global and domestic custodians to oversee $141 billion in insurance assets, believed to be the largest single request for external custody on record.
The Paris-based insurance giant's solicitation dwarfs the previous largest European outsourcing of custody, London-based Prudential Portfolio Managers' January 1996 selection of Mellon Bank and Midland Securities Services as global and domestic custodians, respectively, for 45 billion pounds ($73 billion) in assets.
The exercise also is viewed as an important step in AXA's efforts toward integrating investments of its various European insurance operations. The efforts exclude portfolios managed for third parties.
AXA's U.S. subsidiary, The Equitable Life Assurance Society of the United States, and its Australian unit, National Mutual Holdings, are not affected by the custody effort. AXA has a total of $497 billion in assets under management, as of Dec. 31.
But some observers speculate it's only a matter of time before AXA expands its efforts on a global basis.
"I would have to believe that over a period of time they have to corral this massive empire they have built," one source said.
AXA has issued a four-part request for proposals involving nine separate entities in five countries.
Bids for the business were due in last week.
Thomas Murray Ltd., London, is serving as consultant.
Sources said AXA officials propose allowing each entity to select up to two domestic custodians. Cross-border assets will be consolidated in one or two global custody accounts. Non-domestic assets totaled some $22 billion in assets, of which $12.5 billion is in equities.
Sources said the RFP was sketchy, and suggested AXA executives might be fishing for solutions. An internal meeting to iron out some of the issues will occur within two weeks.
In addition, AXA executives propose creating a separate master custodian role to provide consolidated record keeping, performance analytics and risk controls for all of the European portfolios. This way, the insurance company, which was formed from the merger of AXA and Union des Assurances de Paris in May, can keep track of its overall risk exposure.
Industry experts, however, warned it might take a long time for the master custodian role to be established, given the lack of a common platform among AXA entities and the complexity in receiving data feeds from a variety of sources.
A spokeswoman for AXA said the firm's main goals are to install risk controls and to establish a homogenous fee structure, but it is not clear how that will occur if a variety of custodians are employed. Nevertheless, industry sources expect AXA officials to try to cut their custody fees. AXA officials declined to provide additional details. It is not clear what AXA's timetable is.
AXA's major European units have existing custodial arrangements. AXA Banque, with $36.2 billion in assets, uses Morgan Stanley & Co. for global custody. Chase Manhattan Bank provides global custody for three British and Irish subsidiaries: Sun Life Corp., London, with $20.2 billion; AXA Equity & Law PLC, High Wycombe, $13.5 billion; and New Ireland Assurance PLC, Dublin, $1.1 billion. Sources said Midland provides domestic custody for Sun Life, but in most cases, the domestic custodians - who oversee the bulk of the assets - could not be learned.
Elsewhere, State Street Bank & Trust Co. provides global custody for Colonia Konzern AG's Munich $9.6 billion operation, and its $600 million Vienna unit, as well as Royale Belge, with $10.7 billion in assets in Brussels.
It could not be learned who the current custodians are for UAP, with $46.8 billion in assets, and UAP-Rotterdam, with $2.1 billion.
Breakdowns by asset mix were not available, but it is believed the assets predominantly are bonds.
