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Comment: In the eye of the beholder

Bob Crew finds pension fund managers sceptical about the value of so-called client perception surveys

How useful are domestic and global custody ratings and so-called client perception surveys to in-house pension fund managers and other professionals in the custody business?

Alan Rubenstein, managing director of Lucas Pension Fund Investment Management, says: They are only useful if you are looking at the market for the first time and want a quick feel for how it perceives providers. But, hopefully, none of these surveys can tell us what we don't already know, and we certainly don't worry about what they might say about the performance of our own custodian, which is State Street. We're more interested in the ratings that we give a custodian in-house than any other ratings that it might get in a survey. We're interested in very particular target areas and if we have any concerns we tell our custodian about it and, if not, we give them a pat on the back. We do our own ratings in-house and they never lag the surveys. We pay more attention to the Greenwich Associates surveys than others."

John Colban of Sedgwick Noble Lowndes says: "For our small to medium size pension fund clients most surveys are probably of limited use other than to see how the world at large views the providers of custody, all of whose circumstances, in relation to their customers, are of course very different."

David Batten, relationship manager at RBS Trust Bank, also has his doubts about the surveys. "The trouble, with most of them is that they don't concentrate on different types of client and different requirements. They lump everyone together, so they don't make a lot of sense, or add an awful lot. Too many surveys ask in-house fund managers what they think, yet,in the majority of cases,these are not the people in daily contact with custodians. I don't think that the professionals in the industry spend an awful lot of time looking at the results of surveys. I certainly don't lie awake at night wondering about their results."

Batten says that there are exceptions. He points to the Greenwich survey in the pensions and custody area - which he says "goes into a lot of detail and is costly" - and "the Thomas Murray surveys". But surveys which are sent to custodians' own hand-picked clients who are not identified to readers are, he reckons, irrelevant.

Other observers share Batten's concern and warn against surveys whose ratings are based on data provided by the suppliers themselves or by clients favoured by the supplier. As one points out, that benchmark data is only as good as the data provided by each supplier and that client feedback is only as representative as the sample selected.

Perhaps the biggest problem with surveys is that they do not take account of the fact that, as one adviser puts it: "Many different types of supplier operate in the global securities services market, with leading global custodians at one end supplying a wide range of banking,custody and related services and central securities depositories at the other end supplying a narrow range of services within their own country. And in between are thousands of banks and non-bank suppliers!"

Surveys dealing in client "perceptions" present a problem because some clients perceive things very differently from others. To take a motoring analogy, there are customers who are perfectly content with a Ford, because it suits their particular requirements very well, so they will sing its praises highly, but it doesn't mean to say that it is as good as a Jaguar whose customers might be much more demanding and have a more critical approach. By the same token, there are some custodian banks whose clients are more demanding and critical than others, and others whose clients are not and will say that they are very well satisfied. But when they are all lumped together in the same survey and the Ford comes out on top, like is not being compared with like, and there is something obviously wrong. Handle survey results with care."

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