As more plan sponsors seek tighter control over the risk their portfolio managers are taking, custodians are stepping up to the plate and offering high-tech tools for monitoring managers.
"I think the changing regulatory and legal framework — mainly in reaction to recent corporate and mutual fund scandals — is bringing greater attention to the entire field of investment management oversight," said Matthew Tushman, vice president of institutional product development at Northern Trust Co., Chicago.
"In addition, compliance monitoring on its own is simply being more recognized as a powerful risk management tool because it's an indicator of potential problems within a portfolio," he said. "Four years ago, when the market was booming, clients weren't attuned to those subtleties, but all of a sudden every little increment of return makes a big difference."
Debra Baker, managing director, who runs Bank of New York's global product management risk services group, said that traditionally, portfolio manager monitoring fell to a pension fund's consultant or internal staff, requiring a heavy time commitment and the need to pull information from various sources.
"Where plan sponsors may have traditionally gone to consultants, they're now going to custodians because the data's there," she said. "They're looking at their custodian as a full-service provider."