There is No ‘One Size Fits All’ for Custodial Models

Asset Owner Academy I Insights Series

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There is No ‘One Size Fits All’ for Custodial Models

Asset Owner Academy I Insights Series

March 2022

By Xavier van den Brande
and Marvin Vervaart

Asset owners are navigating an uncertain investment landscape, characterized by a low yield environment and evolving stakeholder expectations. New investment strategies and enhanced transparency and governance are leading asset owners to rethink their operating models across the value chain to optimize investment outcomes. 

Common considerations include but are not limited to:

  • The balance of in-house versus outsourced investment management
  • Data and technology platforms to empower investment processes
  • Reporting and risk solutions at a total portfolio level
  • Insourcing versus outsourcing middle office operations

Within this context, deciding which part of the operational value chain to keep in-house or to outsource is a key decision – and deciding who your outsourcing partner will be is as important.


Custody banks play an increasingly important role for asset owners within the middle and front office. For the largest asset owners, the selection of a custody provider sometimes extends to deciding whether to adopt a single- or multi-custodial model. Some asset owners appoint multiple custodians to address specific objectives, including managing counterparty risk or accessing local expertise.


Asset owner clients globally are increasingly asking which model is best and until now, a lack of data-informed analysis has prevented clients from reaching a conclusion. Through a review of the top 50 global asset owners with which BNY Mellon engages, it is now evident that there is no “one size fits all” custodial model. The choice of adopting a single- or multi-custodial model is dependent on a range of factors, including local market differences and an organization’s own journey.


The top 50 organizations reviewed include three asset owner types: central banks, pensions and sovereign wealth funds across three regions, with a combined total of US$23 trillion AUM. 

Figure 1: Top 50 Asset Owners’ Review, by Region and Asset Owner Type

Figure 1: Top 50 Asset Owners’ Review, by Region and Asset Owner Type

Top 50 Asset Owners Custodial Models


A review of the top 50 asset owners with which BNY Mellon engages uncovered five distinct custodial models and their corresponding adoption.

  1. Single-custodial model: all assets are held with one custodian irrespective of investment approach, asset class or region.
  2. Multi-custodial model (Geographic): custodian selection is based on where assets are located (e.g., developed versus emerging markets).
  3. Multi-custodial model (Asset class-based): custodian selection is based on the type of asset classes (equities, fixed income, alternatives).
  4. Multi-custodial model (Manager-based): custodian selection is based on internal versus outsourced investment management.
  5. Multi-custodial model (Hybrid): custodian selection is based on a combination of 2, 3, and 4.

Figure 2: Top 50 Asset Owners’ Review, by Custodial Model 

Figure 2: Top 50 Asset Owners’ Review, by Custodial Model

* Note: The remaining 6% refers to three central banks in our review that do not use a custodian.

Looking across the five models, specific nuances at regional and segment levels can be observed:

  • The single-custodial model is by far the most common, representing 44% of the top 50 asset owners under review, followed by geographic (22%), hybrid (14%), asset class-based (8%) and manager-based (6%) multi-custodial model.
  • The single-custodial model is primarily driven by the U.S. and EU pension funds who typically adopt a single-custodial model, with a few notable exceptions.
  • Half of the APAC asset owners, which are mostly central banks and pension funds, use a variant of the multi-custodial geographic model (domestic versus international assets, or developed versus emerging markets).
  • Two-thirds of sovereign wealth funds globally use a multi-custodial hybrid model selecting more than four custodians.
  • The majority of European central banks do not use custodians but appoint local Central Securities Depositories instead to custody their assets. Central banks are starting to diversify their holdings (e.g., ETFs, credits, equities), which may lead to increased custodian appointments.

Key Considerations in Custodial Model Selection


The choice of a custodial model is often underpinned by five common objectives which can generally be achieved in both single- and multi-custodial configurations. Some objectives may be emphasized over others depending on organizational priorities or cultural preferences, but asset owners typically consider the following when making their choice:

  1. Operating efficiency – asset owners require a data consolidation solution when appointing multiple custodians to maintain investment oversight, manage enterprise-wide investment risk and support external stakeholder reporting.
  2. Counterparty risk – rather than concentrating assets with a single custodian, asset owners appoint multiple custodians with high credit ratings for asset safety reasons, to spread and reduce counterparty risk.
  3. Market connectivity – through global players with strong market connectivity, asset owners can benefit from enhanced expertise which is specifically important in the more complex emerging markets.
  4. Benchmarking – by appointing multiple custodians, asset owners have the option to benchmark services between providers which drives optimization and competitive pricing.
  5. Data privacy and confidentiality – asset owners appoint multiple custodians to prevent oversight on a total portfolio level and to protect (sovereign) confidentiality.

“More than ever before, asset owners are facing a range of pressures impacting their outlook, priorities and decision making. They are increasingly looking at their service providers to help them orchestrate solutions and streamline information across investment and operational processes for richer insights and greater oversight to help meet their strategic priorities,” said Rohan Singh, Global Head of Asset Owners, Asset Servicing and Digital at BNY Mellon. 


While most objectives can be achieved through any model, the choice of who to collaborate with and how to execute effectively is always a central component to determining success. 

Learn more by visiting BNY Mellon Asset Owner Academy, a platform to share bold ideas, insights and learnings to help asset owners stay agile as they transform their operating models.

Xavier van den Brande

Head of Asset Owners, Europe

Marvin Vervaart

Client Solutions Manager, Asset Owners

Asset Servicing Global Disclosure


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