When Sudha Datta and Jim Harris first met in Toronto, both were taking a well-deserved break from finance after decades in the business.
Datta, the former head of operations at Abu Dhabi Investment Authority (ADIA), announced his retirement at the start of 2016.
Harris, meanwhile, had recently left RBC Investor & Treasury Services having first joined the bank back in 1994.
A lunch meeting revealed a shared knowledge of custody and securities lending and, more importantly, similar views on each area.
No surprise then that they decided to team up and launch a new venture earlier this year dubbed ‘Soterium’.
The aim is to ensure that investor assets placed with third parties are safe, compliant and being used efficiently, as Harris explained to Global Investor.
“Investors, including pension funds and fund managers, have ultimate responsibility for their assets.
“However, there’s a tendency to ‘hand off’ important functions, such as safekeeping and securities lending.
“Our objective is to educate beneficial owners on risk and rewards involved in these areas, review asset servicing contracts, identify where improvements can be made and assess other options.”
The pair have a three-pronged approach in order to achieve this.
Firstly, conduct a series of menu driven ‘Healthchecks’ covering Documentation, Asset Safety, Recovery and Servicing to determine whether clients are getting the most out of the custodial relationships in place.
Securities lending is the second major areas of focus.
“For the smaller, funds which might not have explored securities lending or understand the risk/reward ratios, we will have educational discussions” explained Datta, who was part of ADIA’s key decision making process in terms of outsourcing custody and sec lending.
“We also aim to shed light on securities lending risks, rates and revenues for those already participating.”
Thirdly, Soterium has engaged with a series of partners across post-trade, securities services, asset and people management.
“Collaborating with others through formal and informal sharing agreements will allow us to benchmark service providers accurately and extend our service offering to buy-side clients,” said Harris, who has twice been chair of the Association of Global Custodians - Depository Information Gathering Project.
Datta and Harris have been working on projects since the start of 2018 and officially launched the business on May 31.
“Put simply, we’re demystifying custody and securities lending. We’re also ensuring a high level of compliance in an increasingly regulated world,” Harris adds.
Working with regulators themselves is also on the cards, potentially, for Soterium.
The firm will be involved in custody and securities lending RFPs globally, although that is longer term goal at this stage, with the immediate target audience being beneficial owners in North America.