Mutual Fund Custodian

Data. Reams of it. Masses of it. What stock block was traded when and for how much? What commissions were paid? If Gargantua Fund X bought 19 million shares of Ford, they didn't buy it all at once; they will have bought it in 183 different blocks of somewhere between 100,000 and a million shares at a time, over the course of a week or two. And commission was paid: a penny or four a share to a range of brokers.

All of this data has to be tracked and kept and audited to death. A custodian manages this and keeps track of the location of the funds and their owners, and this is where the custodial relationships get complex. Many big brokerages buy funds en masse for all of the 1,372 clients who want to buy shares in Fund X today.

So the brokerage puts in an order for $273 million worth of that fund, and the brokerage then maintains its own custody of the funds so that they know who owns what. The fund just has one customer as custodian (like Morgan Stanley or whoever). The fund then, doesn't know who its end customers are. It's like a movie producer (like Disney) who licenses Endgame to a theatrical exhibitor, who then sells tickets to its customers directly. Disney has no idea who actually saw Endgame; it just knows that a lot of people did. Fandango, then, more or less ends up as the "custodian" for those movie tickets.