How Mainstream’s custody services can make a difference to your fund
27 Nov 18
Custody services are a critical part of Australian institutional investment. Beyond the security of having funds in custody
, modern technology enables custodians to leverage that information to provide a whole host of additional services, adding efficiency and safety to the wealth management industry.
However, high minimum fees for custody services have long disadvantaged start-up and boutique fund managers. With Mainstream Fund Services' latest move into the custody market, we believe every Australian fund manager can benefit.
Why use Mainstream for fund custody services?
On October 11 we announced our entry into the ‘ standalone’ custody services market
. With $4 billion of assets under custody for 54 clients, across 109 separate portfolios, Mainstream now holds the minimum capital levels to offer master custody services.
Mainstream Fund Services has moved into the custody sphere.
This follows on from several years of offering 'incidental' custody services, in which we could provide this service when packaged with other services like fund administration, accounting and unit registry. Throughout our time operating in this sphere, we have seen a distinct lack of adequate custody services for lower- and mid-level (in terms of FUM) fund managers. We believe our entry into the $3.6 trillion Australian custody services market will benefit managers in the following ways:
Mainstream Fund Services will operate standalone custodianship in conjunction with two sub-custodians, National Australia Bank (NAB) and JP Morgan. Both parties have a far-reaching global presence, which in turn gives our custody clients access to 25 markets (with more available on request).
This level of access has previously been difficult for fund managers to access without using custody services of major players. However, global banks often have funds under management (FUM) requirements of $5 billion or more, pricing many start-up or boutique fund managers out of contention. With Mainstream Fund Services, there is now a path to global markets.
1) Global market access
2) In-house cash solutions
When a fund manager engages Mainstream's custody services through one of our sub-custodians, they gain a massive competitive advantage. We can offer clients coming through this avenue up to 50 basis points off the official cash rate (OCR) as interest on operating cash.
Many fund managers cannot meet the FUM requirements of global custodians.
3) Flexible service modelling
Despite moving into standalone custody services, Mainstream Fund Services will continue to offer bundled operations that encompass all of a fund manager's needs. This packaged service gives fund managers consistency across all of their fund management needs, establishing a single point of contact for fund administration, custody, fund accounting and unit registry.
Additionally, fund managers can use Mainstream for just a select few services as required. For example, a manager can settle with Mainstream while trading through any number of brokers that we work with, using them for research and advice as needed.
Essentially, Mainstream's expansion into custody services ensures that managers can adopt the exact services needed.
4) Competitive pricing
Mainstream Fund Services operates as a boutique partner for Australian investment managers. With a smaller scale than Big Four or global banks (but access to global markets through them), fund managers gain a competitive advantage without the capital outlay required to work directly with the bigger players.
Mainstream's custody offering enables managers to access global markets.
In some cases, managers using Mainstream as a custodian and administrator will be able to save as much as 50 per cent compared to working directly with global securities service providers. Our strong partnerships can facilitate lower brokerage costs, while our aggregation of client arrangements (under the global sub-custodian) drives costs down even further.
5) Trusted and experienced fund custody
Every fund manager with a unit trust must have an appointed custodian - but finding one that matches your needs on price, service and quality can be a difficult proposition. Since 2006, Mainstream Fund Services has been at the forefront of Australian fund administration and associated services, providing efficiency and certainty to managers of more than 790 investment funds.
Coupled with our boutique scale, competitive pricing and full-spectrum service, Mainstream is perfectly poised to assume custody for any Australian investment fund.
Get the best for your investment portfolio
A 2017 Austrade report indicates that Australia's fund management industry is the sixth-largest in the world, sitting only marginally behind Ireland, France and Germany. With ever-increasing competition, it's important that fund managers access every competitive advantage they can - and much of that begins with the right fund custodian.
Whether as a standalone service or bundled with administration, unit registry and accounting, Mainstream Fund Services is capable of delivering high-efficiency, extremely competitive results and insight-driven guidance that sees your fund move from strength to strength.
To find out more about our custody services, contact our team today.