Custodian role evolves over last decade

Demand for custodial services has evolved over the last decade, expanding its role in the financial services industry, according to a new white paper from the Australian Custodial Services Association (ACSA).

The ACSA had released the paper Institutional Investor Services, an updated an earlier version published in 2010.

Custodians provide outsourced custody and related services to the financial services sector, including superannuation funds and investment managers.

Demand for custodial services grew based on institutional investor demands for support in implementing sophisticated investment strategies, improved efficiency, risk mitigation and a backdrop of continuous regulatory change.

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The sector had grown to $3.7 trillion, compared to $285 billion in 1996, the first year statistics were collected by the ACSA.

There was now the need for Australian institutional investors for more information on markets; asset classes; new technology; increased demands for data; environmental, social and governance (ESG) screening; and support for regulation change.

Robert Brown, ACSA chief executive said the industry had experienced a significant level of change in the past decade.

“One of the most significant trends has been growing demand for data, along with a growing awareness by clients that one size does not fit all,” Brown said

“A simple example is how asset valuation from the custodian provides an independent basis for comparing investment performance, enables fund fiduciaries to monitor risk, and underpins the calculation of individual member account balances.

“The key is to recognise that each data set requires different controls, classification and enrichment to be fit for purpose.”