Mutual Fund Custodian

AAA

DEFINITION of 'Mutual Fund Custodian'

A trust company, bank or similar financial institution responsible for holding and safeguarding the securities owned within a mutual fund. A mutual fund's custodian may also act as the mutual fund's transfer agent, maintaining records of shareholder transactions and balances.

Also referred to as a "mutual fund corporation".

INVESTOPEDIA EXPLAINS 'Mutual Fund Custodian'

Since a mutual fund is essentially a large pool of funds from many different investors, it requires a third-party custodian to hold and safeguard the securities that are mutually owned by all the fund's investors. This structure mitigates the risk of dishonest activity by separating the fund managers from the physical securities and investor records.

VIDEO

Loading the player...
RELATED TERMS
  1. Fund Supermarkets

    An investment firm or brokerage that offers investors a wide ...
  2. Pooled Funds

    Funds from many individual investors that are aggregated for ...
  3. No-Load Fund

    A mutual fund in which shares are sold without a commission or ...
  4. Front-End Load

    A commission or sales charge applied at the time of the initial ...
  5. Transfer Agent

    A trust company, bank or similar financial institution assigned ...
  6. Balanced Fund

    A fund that combines a stock component, a bond component and, ...
RELATED FAQS
  1. What is the difference between a custodian bank and a mutual fund custodian?

    Custodian banks and mutual fund custodians, commonly known as mutual fund corporations, perform very similar roles for different ... Read Full Answer >>
  2. Is there a situation in which wash trading is legal?

    Wash trading, the intentional practice of manipulating a stock's activity level to deceive other investors, is not a legal ... Read Full Answer >>
  3. What action is the SEC likely to take on 12b-1 fees?

    The Securities and Exchange Commission (SEC) may take action to impose greater regulation on how 12b-1 fees are used, or ... Read Full Answer >>
  4. What is considered a reasonable 12b-1 fee?

    A reasonable 12b-1 fee is generally considered to be 0.25% of the assets of the mutual fund. The maximum amount allowed for ... Read Full Answer >>
  5. What are some of the most common mutual funds that give exposure to the retail sector?

    There are a number of mutual funds that give exposure to the retail sector. Three of the most popular funds are the Fidelity ... Read Full Answer >>
  6. What is the 12b-1 fee meant to cover?

    A 12b-1 fee in a mutual fund is meant to cover the fees of companies and individuals through which investors of a fund buy ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    4 Strategies For Managing A Portfolio Of Mutual Funds

    Discover some common strategies to devise a plan and maintain your holdings to reflect it.
  2. Mutual Funds & ETFs

    5 Ways To Measure Mutual Fund Risk

    These statistical measurements highlight how to mitigate risk and increase rewards.
  3. Personal Finance

    Mutual Funds: Brand Names Vs. House Brands

    Find out whether an in-house fund will serve you better than a major company's fund offerings.
  4. Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

    Learn about the basics - and the pitfalls - of investing in mutual funds.
  5. Investing Basics

    Shareholders: Vote Your Proxy and Be Heard

    Voting shares, in person or via proxy ballot, is a right every shareholder should exercise. Here's why.
  6. Fundamental Analysis

    Calculating Tracking Error

    Tracking error is the difference between the return on a portfolio or fund, and the benchmark it is expected to mirror (or track).
  7. Investing Basics

    What is the Shadow Banking System?

    The shadow banking system is composed of financial institutions that do not take deposits in the tradition sense.
  8. Investing Basics

    What's a Benchmark?

    A benchmark is a standard investors choose to gauge the performance of their portfolios.
  9. Professionals

    Worried About Stocks? Try on Convertibles

    Convertibles are a good hedge against equity market risk (if you're o.k. with losing a bit of upside potential).
  10. Mutual Funds & ETFs

    Looking To Invest In Texas? Here Is How

    Ranging from energy to household names, here are some of the top investment opportunities in Texas.

You May Also Like

Hot Definitions
  1. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  2. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  3. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  4. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  5. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  6. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!