Dutch custodians have always had a ready-made business because pension funds needed to have their assets held by a third party.
The moves by institutions to have an independent custodian is a reflection of the changes in the investment business. Says Laurens Vis of Kas-Associatie in Amsterdam: The trend to outside custodians is happening as part of increasing investment outsourcing. Whether they are going to an index or specialist active manager, clients are choosing a neutral custodian."
A consequence is that a new tripartite relationship is developing in the marketplace between the plan sponsor, asset manager and custodian, he says. The introduction of services such as 'Fund Manager Watch' to en-sure that clients are alerted to possible breaches of their investment guidelines fits appropriately into such a triangular relationship.
Kas has weathered a period of uncertainty as to its future ownership and will shortly be in the hands of the Dutch financial community, in combination witha 40% float on the stock market. It sees itself as serving a "wholesale client base", with its institutional custody clients split 50/50 between insurance companies and pension funds, says Vis.
Fred Dellemijn at MeesPierson sees the investment changes as a force driving institutions to a custodian with integrated reporting capabilities. "As pension funds increasingly outsource their investments to outside investment managers their control with respect to risk management diminishes," he says. "It is essential that a central point is in place to provide pension funds with consolidated information enabling them to make the right decisions." This is why MeesPierson has anchored the custody services in the field of securities lending, derivatives clearing, cash management and fund services. Securities lending is a very strong product for MeesPierson. "There was a time when clients had to be convinced of its benefits, but now they knock on the bank's door," he says. For Dellemijn, the future of custody lies in a flexible response to customers. "We tailor our services to the level the client wants. If they require sophisticated services or just the basic product, that's what we can provide."
At ING Bank Securities Services, Bram de Korte reckons: "Our securities lending service is the largest in the market. We see it as an added value item on the custody product as it provides extra performance on clients' custody portfolios."
Collateral management is an area where ING is seeing growing de-mand for services. "We have to manage the collateral from our own lending business and therefore the system is also available on a tri-party basis."
Along with the major Dutch custodian ABN AMRO, ING is expanding custody services outside the Netherlands, including securities lending. It is seeing a market in central and eastern Europe, where it is increasingly active offering a regional window approach for this region. De Korte says the bank is pushing ahead with straight through processing(STP). "We expect to be completed for total STP on the settlement side by the end of this year.""