As emerging economies continue to integrate into the global financial landscape, the demand for robust custodial services is surging.
According to IntellectAI, this uptick is driven by a growing number of investors and institutions from these markets engaging in global finance, necessitating expert management and protection of their burgeoning assets.
According to PwC’s Global Asset and Wealth Management Survey from July 2023, assets under management (AUM) worldwide are projected to swell from $115 trillion to an impressive $147.3 trillion by 2027, marking a significant uptick that highlights the indispensable role of custodians in asset management.
Clive Bellows, Head of Global Fund Services EMEA at Northern Trust, provides insights into the future of custodial services. He articulates, “The custodian of the future – Custodian 3.0 – cannot be all things to all people. Clients will expect access to the best technology at any given point of time – enabling them to take advantage of new platforms and strategies to help maximize returns and minimize risk. While these custodians should provide services through technology, they shouldn’t attempt to reinvent themselves and transition into a pure technology company. Rather, they must continue to focus on maintaining the core principles of protecting assets and supporting clients’ investment strategies.”
Global custodians, typically major banks or financial institutions, are tasked with several crucial roles including the safekeeping of assets, where they maintain accurate ownership records, valuations, and manage accounting and reporting through the asset’s lifecycle. They also handle trade processing, ensuring assets bought or sold by investors are tracked, settled, and reconciled accurately. Furthermore, they manage asset servicing which includes the maintenance of the economic benefits of ownership, such as income collection and managing corporate actions and proxy voting, essentially administering all investment-related activities on a global scale.
Agent banks, or sub-custodians, are pivotal in providing access to securities markets worldwide. These banks partner with global custodians to manage tasks in foreign markets, including asset safekeeping, settlement, record-keeping, market access, and advocacy, ensuring compliance with local regulations.
The dynamic nature of today’s custody landscape sees global custodians forming proactive, strategic partnerships with agent banks. These collaborations are no longer purely transactional; they focus on long-term strategies to develop mutually beneficial products and services, leveraging new technologies and integrating services to enhance overall asset safety and service delivery.
When selecting a custodian, clients look for resilience and a proven track record in asset safeguarding, transparency in operations, immediacy in market access and settlements, responsiveness to client needs, and deep market insight through expert advocacy. Local expertise also plays a critical role in effective custodianship, providing on-the-ground knowledge that can be crucial for navigating emerging markets.
Intellect’s eMACH.ai Custody Platform is designed to address the complex challenges faced by custodians. It features a composable architecture that allows for seamless integration and customization, enabling quick adaptation to market changes and regulatory demands. The platform, built on the cloud-native iTurmeric framework, boasts 136 APIs for enhanced connectivity and customer experiences, underpinned by generative AI to boost decision-making and streamline operations. By leveraging these advanced capabilities, custodians can significantly enhance their service delivery, ensuring compliance with both local and global standards.
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