Ask clients to name potential custody providers, and until very recently the odds would have been heavily stacked against the name Clydesdale Bank figuring very high on any list of candidates, if indeed it was to be found at all. Despite having offered domestic trustee and custody services for some 30 years, Clydesdale was for a long time the invisible man of the UK securities services sector. However, after its years in the wilderness, Clydesdale’s star is firmly in the ascendant and the bank is now poised to make its biggest play yet.
Having acquired Clydesdale way back in 1987, National Australia Bank (NAB) had been content to run the business as an independent entity. Three years ago, however, NAB chose to globalise its lines of business – custody included – a move which saw Tony O’Grady, National’s general manager for global securities services, take on responsibility for operations in the UK as well as Australia and New Zealand. O’Grady’s brief was to push the bank into as yet unexplored territory, starting with subcustody. Soon enough Clydesdale had been appointed UK subcustodian for both Brown Brothers Harriman and Mellon – worth £2bn and £35bn respectively, these mandates not only gave the bank a degree of critical mass but, just as importantly, credibility.
Now the bank’s masterplan has moved into its second phase. Last month Clydesdale unveiled a new master custody offering that possesses all the attributes of NAB’s existing Australian offering, but with the addition of a “unique” IT platform – supplied by Massachusetts-based investment management solutions provider Eagle Investment Systems – that has been customised for the UK. “The Eagle platform gives us a two-year lead on the market in terms of the technology that is out there,” says Patrick Liddy, global head of sales and marketing for Clydesdale Bank Global Securities Services (GSS). “Clients have four key needs – they want information quickly, they want it accurate, they want it cheap and now they want it delivered in a flexible manner. I know a lot of players that can do three of those things, but we will be the only one that can do all four.”
The new solution looks to move the master custody model on from the current “islands of technology” scenario. Instead of a complex web of interaction between separate trading, custody, analytical, accounting, performance and other in-house systems, with data integration and transformation handled at the report level, these systems all plug directly into the central Eagle ‘hub’ which translates and transforms data while offering support for both complex instruments and relationship management.
In addition to a PACE data warehouse providing compliance reporting, client reports via the Internet and scheduled email and SMS text messages to mobile phones, the new system also combines accounting and tax functionality, encompassing portfolio accounting information, trial balance and NAV. “The hub structure with its single centralised database means all functional elements use the same data and so there is no recycling and hence needless duplication resources or effort,” says GSS executive head Ray Lester. “The new platform allows a valuation to be extracted from any layer of a manager-of-managers fund structure, while its relational database allows information to be comprehensively sliced and diced. That ability to ‘look through’ a tiered investment structure carries significant benefits in terms of price and efficiency.”
It is also a rules-based system, which means new reporting functionality can be quickly written and integrated by in-house analysts, thus dispensing with the laborious reprogramming typically required by legacy systems. “This means solutions to complex programming changes can be handled within days, not months,” says Dr Chula Na Ranong, director of technology at GSS.
The new solution has already been adopted by NAB’s own wealth management division in the UK for daily pricing and valuation, analytics and attribution and mandate compliance. Lester is at pains to point out, however, that GSS received no preferential treatment during the selection process. “They are currently converting from a unit trust to a new Oeic structure which is a manager-of-managers arrangement,” he says. “They certainly weren’t fixed on using us from the outset – in fact, the truth is that they searched the whole UK market but could not find anyone else who could meet their needs.”
Initially Clydesdale will be targeting UK pension funds, unit trusts and Oeics, although ultimately it is also looking to provide the sort of full back office servicing that it is currently offering to its fund management clients in Australia. “We believe we have a good chance of picking up pension funds and managers between £100m to £1bn in size, particularly in Scotland where we already have a well-established brand name,” says Liddy. “A lot of pension funds in the UK have, for whatever reason, been unable to deliver as much diversification as they – or the UK government for that matter – might have liked. Thanks to the sophistication of the Eagle system we can facilitate that.”
Tim Steele is a freelance editor // timjsteele@btinternet.com

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