This Euro 16 bn pension provider wanted to ensure that the total custody fees they paid were in line with market practices.
• Analysis of the investment portfolio (including assets held and transaction volumes across various countries).
• The activities and service package of the custodian were also analysed in depth. This turned out to be rather complex, mainly due to a large OTC derivative trading book and the illiquid investments.
• Based on this a peer group analysis was performed against the top five global custodians.
• Ultimately we concluded that a tender would not lead to material changes.
• Consequently a list of items was identified where the fund could negotiate better terms with the incumbent custodian and Avida led these negotiations in co-operation with the finance director of the pension fund.
Deliverables for the client:
• Confirmation that a formal tender procedure would not be necessary.
• Assurance that the existing fees schedule with respect to core custody functions (such as asset keeping in various countries and investment administration) was broadly in line with market practices.
• A new negotiated fee schedule for non-core custody services such as regulatory reporting, collateral management, OTC derivative trading valuation, securities lending and forex trading.
• A new set of KPIs to measure and compare the quality of the custodian’s work.
The assessment took less than three months.