Custody
Custody refers to where and how assets are held and safeguarded, including oversight of who controls cash and securities.
Definition
Custody is the safeguarding of fund assets through qualified custodians or prime brokers, including cash controls, account structures, and authorization policies. Custody reduces the risk of misappropriation, operational failure, and reporting inconsistencies. Allocator Context Institutional allocators often require qualified custody arrangements and clear segregation of duties. Custody is especially important in liquid strategies and in vehicles with frequent subscriptions/redemptions. Decision Authority Custody arrangements are reviewed during ODD and compliance diligence. Weak custody controls can be a hard blocker for regulated allocators. Why It Matters for Fundraising Custody clarity signals operational maturity. Managers that can explain who controls assets, how cash moves, and what controls exist reduce investor risk perception. Key Takeaways Protects assets and reduces fraud risk Often required for institutional allocations Segregation of duties is critical Clear custody setup accelerates approvals