In an investment fund such as a mutual fund, hedge fund or commodity pool, a third party custodian acts as an intermediary between the investment adviser (or fund manager) and the client. Under this approach, the fund manager or adviser never handles client checks, deposits or withdrawals directly. 
In a typical third-party arrangement, assets are held at an institution (the "custodian bank") " in either a separate account or an omnibus master account controlled by the entity providing the custodial service.
Services offered by a custodian typically include settlement of trades, investment of cash balances as directed, collection of income, processing of corporate actions, pricing of securities positions, and the providing of recordkeeping and reporting services.
Video: Third-Party Custodians
Third-Party Custodians: Here, Hold On To This
Futures customers are still wondering just how their money can stay protected in the case of a default by their broker. While some solutions are still in the concept stage, others are available right now. Horizon Cash Management’s Michael Markowitz explains the third-party custodian model, whereby customers set up and manage excess margin at a bank outside the brokerage firm. Third-party custodial arrangements are available now and could be one way to restore customer confidence.
- Third-party custody: A must to protect your assets from fraud. Karpus Asset Management.
- Firm Brochure. Horizon Cash Management.
- Answers about Bank Custodians. Office of the Comptroller of the Currency.
- Third-Party Custodians: Here, Hold On To This. John Lothian News.