A custodian is a firm or a bank who is responsible for holding and protecting mutual fund assets to reduce the risk involved in such investments. Through their holding of securities in physical or electronic form, custodians offer a safe method of holding and protecting such assets. This is especially true for mutual funds, which are worth a lot of money and contain various different investments.
Role and Duties of a Custodian
The custodian’s main function is to keep the securities and other assets in safe custody, but they are not responsible for managing the portfolio. Therefore, they are supposed to ensure that the assets are safe, but they do not decide when to buy or sell the securities or direct the investment portfolio. Their function is to offer administrative services and ensure that the assets are accounted for and safeguarded.
Key Characteristics of Custodial Services
The key characteristics of custodial services are:
- Maintaining securities in physical or electronic form to ensure their safekeeping
- Providing administrative support to help in the management and protection of the assets
- Not being involved in portfolio management so that investment managers can focus on making investment decisions
- Minimizing risk through offering an independent and secure means of holding and keeping assets.
Conclusion
A custodian plays a vital role in safeguarding mutual fund assets, reducing risk, and providing administrative support. Understanding a custodian’s responsibilities can enhance confidence in investment security. Sign up today to explore how Religare Broking facilitates custody services for mutual fund investments.