The three big trends leading to an increase in investors switching their custodians over the past two years are more competitive prices, greater service provisions and the funds’ greater allocations to overseas investments.
This is according to Drew Vaughan, owner of Dymond, Foulds & Vaughan, who will be chairing a session on custodians at the Investment Operations Conference, Sydney, on February 24, 2016.
As large super funds become global in scale they are looking outside of Australia at investment opportunities, leading them to examine the types of services, capabilities and investment IP that other global scale institutional investors might be using.
“The consequence of that is they are wanting to make sure they are aligned with the global scale provider,” Vaughan said, which in turn has driven a move to global custodians.
Super funds have also become more rigorous in their approach to custodians. They are asking how they can maximise the use of the services offered by a new custodian and they are revisiting what they have done for with their existing custodian.
“Often they have settled into a groove, if you like, and it can be time to shake that up; to look and see if there’s a business process reengineering step here.
“Not only to better utilise the services a new custodian might offer, but actually to revisit some of the things we’ve been doing for a long time. Maybe those things haven’t always been the most efficient, they just suited the environment at the time and they’ve never been looked at again.”
He also made the point the service provision by custodians has significantly picked up in the last two years, particularly with new technologies coming on board coupled with the improving quality and experience of the staff.
“The consequence of all these factors is a lot more competition and better services available. The end result is that clients are considering the effort involved in changing custodians and the benefits that might be ascribed to any change of custodian.”