custodial fees: trading expense or management?

CFA Level III
#1

pretty sure it’s management but wanted to double check.

#2

I thought it was trading expense. The custodian would be like Fidelity, the entity that houses the investment, not the manager themselves.

#3

actually i think the answer is neither… page 282 book 6 admin fees: defined as all charges other than trading expenses and investment management fees, could include coustody, accounting, consulitng, and legal fees among others. such fees are t ypicall not under the investment manager’s control.

#4

Cool. I guess direct trading fees are only commissions and spreads then…

#5

sounds right

#6

That is kind of confusing because those direct fees are charged by the custodian. I think I have seen examples where those fees are treated as trading expeses. I wonder if there is a distiction between custodial fees (which could included the direct trading expenes) and just custody fees. I know that sounds really dumb, but I could swear I’ve done problems like that.

#7

i guess the key is to understand the difference between trading and custodian expense. I know what a trading expense is, but what the hell is a custodian fee anyways?

#8

custodial fees are basically the costs of of holding the assets and performing the necessary admin. on those assets for the owner. I believe.

#9

custodial fees are basically the costs of of holding the assets and performing the necessary admin. on those assets for the owner. I believe.

#10

Yes, costs for all the admin activities like accounting, settlement, etc. The reason you use custodians, at least in the mutual fund industry, is to legally separate the investment assets from the company/investment manager that does the day-to-day portfolio management and investment decision-making. So in case that company goes bankrupt, the mutual fund shareholders’ assets are protected from any outside claims. By the way, custodians are also used for repo transactions, for the same reasons, it gives you more protection in case the counterparty defaults.

#11

good info hk.

#12

Just trying to help out whenever I can…although that’s not very often =)

#13

i recall the return cal should deduct trading exp but not custody fee bec it is not within their control