Custody+: The solution to the new expectations in Fund Industry

Custody+: The solution to the new expectations in Fund Industry


To better appreciate the challenges of the Fund Industry, we need to acknowledge its several market actors with their different regulatory engagements towards the Fund & Market regulators. These actors include the Manager, the Administrator, the Regulator/Auto Regulator, the Distributor, the Auditor, the Asset Controller, the Liabilities Controller, the Risk Agent, the Autonomous Agent, the Consultant, the Lawyer, the Clearing Participant, the Depository, the Central depository, etc.

The Middle-to-Back activity for the Fund Asset side is carried out mainly by the Custodian, the Controller, and the Fund Administrator & Compliance Department. This is secured through performing specific roles and business services primarily to end clients by the leading market actor.

/ The Custodian provides these services: Clearing & settlement, Asset keeping, Securities Position Reconciliation, and corporate action management.

  / The Controller oversees all Pricing & portfolio valuation, transaction booking, and Provisions (Pricing, Portfolio valuation, Payable/Receivable, Cash balance, Performance, Rentability, Management fees, Performance Fees, etc.).

  / The Fund Administrator processes NAV Calculation, Fund Accounting, and Regulatory Reporting.

  / Fund Compliance processes can be split into Compliance before trading and Compliance post trading


Custody/Custody+ Services

Custody Services can be summarized as client instruction clearing and client position keeping. Such services are evolving as there are new emerging expectations, mainly when the clients are Funds, Insurance companies, or Administrated Portfolio Managed.

To deal with such complexities, Custody+ provides the Administrator with all NAV calculation pre-requisites by:

  / Dealing with all the Fund Controller services

 / Establishing a secure link with no user manual interference between the Fund Administrator Middle Office and the Custody

Fund Industry custody

Custody and Fund Administration Desk’s Organization

Regardless of the department organization, whether it is a separate Custody and Fund Administration Department or a stand-alone Custody and Fund Administration Department, VERMEG offers an adequate architecture to each organization.

Desks’ organization depends on the Financial market regulator organization and could vary depending on the:

  / Legal engagement of each market actor by market

  / Internal / Third-party Fund

  / Onshore / Offshore Fund

Organization custody

Fund Compliance

Fund Compliance activity can be split into Compliance before trading and Compliance department post trading:

  / Before trading, the Compliance department could be considered part of the Fund Administration department.

  / The compliance department post trading is an autonomous department from the Custody department

Fund Compliance processes:

  / Before trading: Trading Simulation Services are more related to the Administrator to enable them to anticipate the impact on the NAV before the trade is made

/ Post trading: regulatory ratios control & investment policies control Services more related to the Custodian to calculate and manage the impact on the NAV after the trade is made and generate adequate alerts or Reporting to CVM authority

Suite MEGARA covers both business scopes:

  / Before trading: delivered on request within Custody +

  / Post trading: managed by a MegaCompliance, as a part module of Megara Securities Services Platform.


Custody+ services details

In addition to the traditional Custody Services, Custody + offers the following business services

/ Fund Asset Side

    • Management of Derivatives contracts
    • Operation on commodities
    • Fund cash balance keeping and online cash forecast
    • Overdraft management by Client cash account and/or Pool of Client cash accounts
      • Intraday
      • Overnight
    • Margin call management
    • FX request management
    • Profitability or Debtor/Creditor interest on cash account balance
    • Portfolio indexation and Benchmark calculation
    • Performance calculation
    • Management Fees: could be accrued
      • Custody Fees
        • Transaction Fees
        • Turnover
        • Safekeeping fees
      • Management fees
        • Management Fees
        • Controller fees
        • Administrator fees
        • Clearing fees
        • CVM fees
        • Fund manager fees
        • Fiduciary services
        • Distribution
        • Other fees
      • Performance fees
        • NAV
        • Watermark

/ Fund Liability side

    • Subscription & redemption operation – Omnibus consolidated operation by Fund
    • Real-time Impact of the fund cash Balance (Asset side)
    • Number of shares in circulation

habib tanoubi


Deputy Director

Senior Business Lead, MEGARA