The major recent survey by the National Association of Pensions Funds found that only 75% of 600 or so UK private sector schemes responding used an outside custodian. Among public authority schemes only 61% of the 56 schemes used outside custodians.

But the NAPF believes these responses understate the true position and that a higher proportion do use outside custodians. Most noticeably, numerous respondents using pooled investment arrangements did not think they had an outside custodian,” says the association.

Among private schemes using outside custodians, 56% used their investment manager as custodian, while 46% used independent custodians, and 4% used “other”.This contrasts with the public schemes where 62% used an independent custodian and 41% the investment manager, with 9% using other.

A survey last year by Greenwich Associates of over 350 funds, with £50m plus under management, looked at the custody methods used in the UK. It found that 38% of funds used a separate bank, while 42% used the investment manager only and 17% internal staff. The use of a separate bank was highest among subsidiaries of US firms at 50%, with 39% of UK companies and 36% of local authorities using this route; for other UK subsidiaries the proportion was 35%. Nearly 75% of funds with over £1bn in assets use a separate bank, with only 17% using their investment manager.”