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Custody services
June 28, 2021
3 mins

Tailored global custody services are vital for sophisticated investors

June 28, 2021
3 mins
John Donovan
Director, Custody Sales, Americas
business people during meeting
SUMMARY

Unique financial strategies facilitated by an experienced team could go a long way in meeting the custody needs of sophisticated investors in an increasingly globalized landscape.


Today’s sophisticated investors routinely look for financial institutions who can support their unique financial objectives, provide a sound and proven gateway with global access to international markets, and facilitate the safekeeping of multi-currency collateral for bespoke credit solutions.

Whether individuals are pursuing opportunities to create liquidity against their holdings, or to monetize their concentrated stock positions, the right global custodian can provide safety, security, and administration of collateralized assets in an agile way.

For many different reasons, ultra-high net worth individuals routinely sign and enter into credit agreements, as well as related security agreements.

Collectively such “Transaction Agreements” require the individuals to pledge collateral to the secured party as security for the performance of the pledgor’s obligations with respect to the transaction.

In order to simplify and accommodate that structure from an administrative standpoint, we believe the right custodian can provide the necessary tri-party legal agreement, and function as the intermediary for the borrower and pledgor, while providing a security control interest for the secured party.

The custodian can also facilitate the provision and maintenance of the collateral per the terms of the negotiated “Custody and Control Agreement.”

For instance, on one recent occasion, a large multi-family office client was looking for margin finance options against a large concentrated equity position in a European market.

The case was not unusual, for in today’s global environment security collateral may or may not be US dollar denominated.

In reality, a global custody platform that can provide safe-keeping for multi-currency denominated securities, along with the additional capability and capacity to pledge that position as collateral is essential.

Of course, as a precursor, choosing the appropriate global custodian with expertise in numerous foreign markets is indeed a critical starting point.

Ensuring this can greatly reduce the complexity associated with a foreign stock holding, not to mention an internationally balanced investment portfolio.

Furthermore, a suitable global custodian can provide direct foreign exchange services if the collateral is sold, exchanged or swapped out for another currency-based asset by the client akin to the case study highlighted by us above.

This aforementioned credit/custody service was bespoke in nature, and uniquely fit the client’s financial circumstances.

Finally, on a more holistic footing when it comes to global custody services in general, an often overlooked yet distinctive feature clients should always consider is to first identify a provider with a compatible and fitting service model.

Many sophisticated custodians, who serve the unique investment needs of the ultra-wealthy, have dedicated service professionals with several years of experience in the custody industry.

A dedicated team can administer a pledged account that is also professionally and actively managed by the client’s investment manager of choice.

This client-focused service team should act on your behalf and serve as your trusted advisor for all aspects of the global custody world. Such bespoke service elements can make all the difference.

Our dedicated private banking team and custody specialists provide institutional-level expertise through highly personalized service. To find out more, please contact your Private Banker, who will be more than happy to set up a meeting with a Custody Specialist.

All credit products are subject to credit approval. Nothing contained herein is a commitment to lend by Citibank, N.A. or an affiliate.

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All credit products are subject to credit approval. Nothing contained herein is a commitment to lend by Citibank, N.A. or an affiliate.