Due diligence helps to ensure that you can be comfortable that the risks are minimised by selecting a provider who can deliver what you need,” Travers says. This due diligence process might also need to cover which custodial services are being run offshore. Rice Warner forecasts that narrowing profit margins will make it more appealing for custodians to send more services offshore to reduce operational costs. This can be an attractive option if cheaper offshore operations meet super funds’ operational risk requirements. Travers says most custodians in Australia already perform some tasks in offshore offices. Back in 2009, JP Morgan Worldwide Securities Services made redundant some of its Sydney employees’ roles in accounting pack preparation and reconciliation work, and hired staff in Mumbai and Manila to perform these tasks. Most large custodians run global businesses and co-ordinate workloads between offices in Australia, the US, UK and Asia. “It’s hard to say if they really have a business in Australia,” Travers says. “I think all custody businesses have some component of offshore servicing. Our global custody business runs out of London.” O’Sullivan says offshoring decisions are made to suit each business individually, but State Street does believe the future of custody will involve a “follow the sun” framework. “Custody is very mobile because it depends where the trade is taking place.” But will offshoring have a detrimental impact for Australian clients? According to O’Sullivan, it won’t change the need to have staff on the ground locally to complete the “most important functions” such as unit pricing, crediting rates, risk reviews and investment analytics. Clients want to pick up a phone and speak to local staff who have expertise and who understand the specifics of their fund.