One way to find out is to test your fees against the Thomas Murray database of fees being paid by other clients with similar assets under management, comparable portfolios and equivalent levels of transactional activity. A standard analysis places every client in a peer group quartile, and includes an estimate of any savings which can be made. Thomas Murray is also available to help clients renegotiate fee structures and schedules with their custodian banks.
A Thomas Murray contract review evaluates all provisions of a custody contract that touch on the safety of assets and the mitigation of risk, and compares them to the best currently available in the market. Any deviations from best practice highlighted by the review can then be remedied. A contract review also assesses service level agreements (SLAs) against best practice, and makes recommendations to correct any shortcomings in current levels of service.
Executing foreign exchange transactions is one of the principal sources of revenue of the custodian banks. By analysing the full details of all the foreign exchange bargains struck by a custodian for a fund, and comparing them to market rates provided by data vendors, Thomas Murray can measure the competitiveness of the rates achieved. By providing an indication of the aggregate cost above market rates charged by a custodian, the analysis ensures any renegotiation is fully informed.
It is easily forgotten that cash awaiting investment, or received as collateral in a securities lending or financing transaction, is an asset of the fund. Yet it is often managed by the custodians, which earn considerable revenues from the difference between the rates of interest they collect and the sums they pay back to investors. Thomas Murray uses data supplied by custodians to funds to measure whether the net interest margin charged is in line with market rates.
Recent events have shown that many investors did not fully understand the risks they were taking by lending securities, especially in the reinvestment of cash collateral. Thomas Murray has long measured returns on securities lending against comparable lenders as well the counterparty and other risks incurred. A full review measures the returns achieved in relation to specific portfolios and carefully selected peer groups, as well as risks taken and fees paid.
The only way to measure the operational performance of your custodian is to measure it in specific service areas against appropriate industry benchmarks. Thomas Murray takes monthly data from dozens of custodian banks, and uses it to create benchmarks against which the performance of each individual bank can be measured in trade instruction, settlement and failure, income collection, corporate action notification and instruction, tax reclaims and client service.
One way is to commission from Thomas Murray a private rating of your existing or prospective custodian. The rating, which uses the familiar AAA to C ratings scale, is based on the response by a custodian to a detailed, structured questionnaire that tests the riskiness of a provider as well as its capabilities in specific service areas such as settlement, safekeeping, income collection, corporate actions, cash and foreign exchange, tax reclaims and securities lending.
The risks of holding assets in custody with custodians are well-understood. Less obvious are the risks posed by the other intermediaries through which assets must pass or be held when they are bought or sold, especially central securities depositories (CSDs). Users of Thomas Murray custodian monitoring services enjoy complimentary subscriptions to detailed and regularly updated reports on both local market infrastructure risk in general and CSD risk in particular. Refer to Market Data and Ratings for further information.
If you are based in Europe and would like to purchase this service, or find out more about it, please contact: Nick Bradley at firstname.lastname@example.org or telephone him on +44 (0) 20 8600 2300
If you are based in North America and would like to purchase this service, or find out more about it, please contact: Linda Bernard at email@example.com or telephone her on +1 416 628 3872