The founder's view

Among the key principles when setting up a magazine for an industry is helping it meet its challenges through informed editorial about markets and providers. Charles Ruffel succeeded in doing that with Global Custodian
By Editorial
Charles Ruffel

Among the key principles when setting up a magazine for an industry is helping it meet its challenges through informed editorial about markets and providers. Charles Ruffel succeeded in doing that with Global Custodian

When Charlie Ruffel launched Global Custodian, the business of global custody was still recovering from the shock of the crash of 1987. That event had catapulted securities servicing up the list of senior management concerns at custodian banks and broker-dealers. The risks associated with extended settlement periods and an environment where delivery against payment (DvP) was the exception not the rule, had highlighted major market infrastructure weaknesses. These illustrated just how much higher were the risks of cross-border investment and trading, compared with risk in domestic markets, particularly the U.S. At the same time, a concentration of market knowledge among a handful of experienced veterans had shown the vulnerability of the banks themselves, not to mention less sophisticated clients, counterparties and competitors.

The cross-border business was of course still hugely profitable for managers, brokers and custodians alike, but to grow it needed to get organized. So just as Global Custodian needed a flourishing industry, the industry needed a quality publication of record to provide a guiding light to best practice and neutral reporting of what worked.

Looking back to that time, Ruffel is justifiably proud of the achievements, both his own and those of his colleagues. “I think we met the challenges of the time effectively. Delivering intelligently written pieces about markets and providers was our primary objective,” he says. “We felt that if we could succeed at that, then the advertising and commercial success would follow.” However, Ruffel accepts that success was not easy. “Journalists need someone to explain to them what is happening. Only then can they begin to report effectively. We were very lucky that leaders in the industry were willing to share their knowledge with us in those early days.”

The next stage was to professionalize the industry, with leading firms devoting senior resources to industry initiatives, such as G30 and the International Securities Services Association (ISSA), investing in technology and employing experienced operations and risk managers to institute the processes necessary to support growth. “I genuinely believe that Global Custodian played a significant role, especially in the first decade,” comments Ruffel. “These businesses that had had little or no visibility historically were suddenly thrust under the spotlight. Senior management everywhere wanted reassurance that the money was being well spent, processes were improving, clients were happy and the business could continue to grow rapidly in a controlled way.”

Under Ruffel’s leadership the magazine was quickly recognized as a credible, independent source. Its surveys provided a basis for informed dialogues between providers and clients. Its reporting raised the profile and confirmed the success of both private and industry initiatives, and its commercial offering allowed providers to present their credentials in a highly targeted way to both current and prospective clients.

In the second decade the story moved to expansion, both of services delivered and markets covered. Network managers had to cover up to 100 markets. According to Ruffel this was only possible because of the focus of a handful of regional and global banks, lead by HSBC and Citi, in staying fully committed to the sub-custody business on a worldwide basis. Ruffel admires their long-term commitment in a financial industry increasingly under pressure for being too short term.

But focus and expertise was an important story in other parts of the business as well. Ruffel cites State Street as being the first institution to “bet the bank” on securities servicing and asset management as well as having the foresight to recognize the need to move well beyond its comfort zone in Boston. “Hiring Marsh Carter as CEO was in hindsight a brilliant strategic move, but at the time it was seen as a high risk approach for what was still widely regarded as a ‘local’ bank,” says Ruffel.

Looking to the future, it is clear to Ruffel that the financial crisis has had an effect on the industry that will be felt for some years yet. New regulations and capital requirements will no doubt strengthen the business, but adapting to their consequences will take time, and investment in some markets may remain beyond the pale, literally as well as figuratively, for decades to come.

But Ruffel also recognizes the importance of playing a long game in the world of securities administration, believing that demography will drive more change than regulators, as the West ages and faster-growing younger countries become rich enough to sustain their own savings industries. Summing up, Ruffel concludes, “The story of the first 25 years of Global Custodian was about supporting and administering the investment of North American and Western European capital in ever more exotic markets around the world. The next 25 years will be about the investment administration of the new wealth of Asia, the Middle East, Latin America and Africa. I confidently expect Global Custodian to be reporting on how those stories turned out in another 25 years, even if I may not be around to witness it personally.”

–Robert Kay