When most South African retirement fund trustees think of a custodian bank, a set of standard criteria comes to mind. Custodian banks hold and safeguard financial assets, protecting them from loss. Custodians facilitate the settlement and clearing of trades, ensuring timely and accurate transfer of securities and cash. The custodian handles proxy voting and corporate actions, such as dividends, interest payments and mergers, ensuring clients receive entitlements.
However, local trustees might be unaware of custodian service offerings that extend beyond safekeeping, settlement and corporate action processing.
“The custodian’s unique proposition to a retirement fund rests on its ability to build on its custody appointment to provide a wide range of services aimed at streamlining administration and regulatory compliance, while generating incremental returns and reducing unnecessary costs,” says Adam Bateman, Head: Business Development and Strategic Partnerships at Standard Bank Investor Services.
Three areas where custodians have expanded beyond their traditional roles to enhance the value provided to retirement funds include investment administration, securities lending and transition management.
Not unlike their global counterparts, South African custodians have moved well beyond the traditional roles of safekeeping, settlement and corporate action processing to provide retirement funds with a comprehensive range of investor services.
Trends towards an increased focus on fiduciary responsibilities and accountability of retirement fund trustees has led to a greater demand for independence, transparency and fund governance. With their large balance sheets and significant spend on technology, custodian banks are in a great position to meet these demands, providing a secure environment to report and monitor investment portfolios, generate additional income, and preserve capital.
“By using a custodian for investment administration, securities lending and transition management, retirement funds can benefit from the bank’s economies of scale and risk management frameworks to provide cost effective solutions, which protects and benefits the fund’s beneficiaries,” concludes Bateman.
