Mutual Fund Custodian

Definition - What does Mutual Fund Custodian mean?

Mutual Fund Custodian ia a qualified financial institution that maintains physical custody of a mutual fund’s cash and securities. Custodians are usually banks, trust companies, or Exchange member firms.

Testopedia explains Mutual Fund Custodian

According to the Investment Company Act of 1940 mutual funds are required to be diversified i.e.: at least 75% of the fund's assets must be invested in securities. That means the mutual fund invests in a large number of different securities. Those securities are held in safekeeping by a custodian, aka: a custodian bank, who also provides bookkeeping services for the fund. The custodian charges a fee for these services, which makes the custodian an expense to the fund, and therefore part of the fund's expense ratio.

Connect with us

Testopedia on Linkedin
Testopedia on Linkedin
"Testopedia" on Twitter

Sign up for Testopedia's Free Newsletter!