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Harvard Management Switches Custody of Some Assets From Citibank To BNY

In order to help prepare for T+1, Harvard Management has switched custody of some assets from Citibank to the Bank of New York, where it feels advanced technology will help achieve straight through processing.

Harvard Management Company, which manages the assets of Harvard University's $19 billion endowment fund, has switched custody of $1.75 billion of that fund from Citibank to the Bank of New York (BNY).

Though he refused to go into the specific reasons for the switch, Chief Operations Officer at Harvard Management Steve McSweeney did say that his company started considering making a change about a year ago.

BNY, he says, offers technology and support that will help ready the fund for a T+1 environment (the one-day settlement cycle for securities transactions slated for 2004) by facilitating straight through processing (STP, or fully automated processing of securities transactions from pre-trade information to settlement).

Particularly attractive to Harvard Management is the fact that BNY can provide web-based technology, "almost" real-time reporting capabilities, and 24-hour support in three different time zones, says McSweeney.

In general, he explains, a custodian provides for the safekeeping of securities--i.e., making sure securities are registered in proper form. In addition, a custodian ensures that income collection requirements are fulfilled and entitlements are accurately tracked for corporate actions.

McSweeney adds that, on top of BNY, Harvard Management deals with a number of other custodians--most of which specialize in specific markets. "We have a very extensive custodial network. We use State Street Bank domestically, BBH (Brown Brothers Harriman) for emerging markets, and we are also direct participants in Euroclear," says McSweeney. "Custodians are divided by market ... For example, BNY has G7 developed markets, so we use BNY as our clearing firm for most of Europe and Japan ... On the other hand, we use BBH for emerging markets, including South America, the Pacific Rim and Africa."

Harvard Management Company, a wholly owned subsidiary of Harvard University, was founded in 1974 to manage the University's endowment, pension assets, working capital, and deferred giving accounts. BNY is the world's largest custodian bank with over $7 trillion in global assets under custody.

McSweeney says that while the T+1 deadline is a few years off, it is never too soon to start preparing for the inevitable. He adds, "looking at what's coming down the pike, it seems like now is a good time to get your ducks in order."

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