What Is a Trustee, and Do You Need One for Your Fund?

Published:

11 November 2026

•

8 min to read

Almost every Australian fund is a trust. That single structural fact means almost every Australian fund has a trustee — the legal owner of the fund’s assets, the party on the other side of every contract the fund signs, and the entity your investors are ultimately relying on.

For a manager setting up a first fund, the question is rarely whether a trustee exists. It is who that trustee should be, what it is obliged to do, whether it needs its own licence, and whether it can hold the assets itself. This article works through each of those, and ends with what separates a workable trustee arrangement from an arrangement that causes problems in year two.

‍

What Is a Trustee?

A trustee is the legal owner of property that it holds for the benefit of someone else. In a fund, the trustee holds the fund’s assets — cash, shares, loans, property, whatever the strategy calls for — and the investors hold units representing a beneficial interest in those assets.

The split between legal and beneficial ownership is the whole point. The trustee’s name is on the bank account, the share register and the title deed. It is not the trustee’s money. If the trustee becomes insolvent, trust assets are not available to its own creditors in the ordinary way, because those assets were never beneficially its own.

A trustee’s powers come from two places: the trust deed and the general law of trusts, supplemented by the trustee legislation of the relevant state or territory.

‍

So Do You Actually Need One?

If your fund is a unit trust — and in Australia it almost certainly is — then yes, structurally. A trust cannot exist without a trustee. The real question is not whether to have one but who it should be, and that is a live decision with cost, control and credibility consequences.

There is one branch worth settling first. Where a scheme has to be registered with ASIC, which is what happens once retail investors are involved, the operator is a responsible entity rather than a trustee, and a different regime applies. Which of the two your fund needs is decided by who you raise capital from, and is set out in full in FundBase Group’s article on trustee vs responsible entity. The rest of this article assumes the answer was "trustee" — an unregistered, wholesale fund.

‍

What the Trustee Actually Does

In a wholesale fund, the investment manager runs the strategy. The trustee does everything that requires a legal owner:

Holds the assets. Legal title sits with the trustee, in its capacity as trustee of the named trust.
Issues and redeems units. Applications, redemptions and transfers are executed by the trustee under the terms of the deed.
Signs the contracts. Custody agreements, the investment management agreement, subscription documents, brokerage and banking arrangements, and the fund’s own trading contracts.
Appoints and oversees service providers. The administrator, the registry, the auditor and, where used, the custodian.
Supervises the manager. The trustee delegates investment decisions to the manager under the investment management agreement, but delegation is not abdication — the trustee remains answerable to unitholders for how the trust is run.

Sitting under those functions is a set of duties drawn from general trust law: to act in the beneficiaries’ interests, to avoid conflicts and unauthorised profits, to act impartially between classes of unitholder, to keep proper accounts, and to exercise the care a prudent person would exercise. The deed can shape some of these. It cannot make them go away.

‍

Does the Trustee Need Its Own AFSL?

Usually yes — and the detail here is currently in flux, so it is worth understanding rather than delegating.

ASIC’s position is that a trustee that issues, varies or disposes of interests in an unregistered scheme must generally hold an Australian Financial Services Licence authorising it to deal in a financial product by issuing, varying or disposing of interests in a managed investment scheme.

ASIC’s guidance on scheme registration records that operators of unregistered schemes must also hold a licence covering any other relevant financial service they provide in relation to the scheme and its assets — a custodial and depository authorisation being the obvious example. For the licensing paths themselves, see FundBase Group’s articles on what an AFSL is and CAR arrangements.

‍

Who Holds the Assets: Trustee, Custodian, or Both?

This is the question managers most often skip, and it drives real cost.

Holding assets on behalf of investors is a financial service in its own right. Any licensee authorised to provide custodial or depository services, including a fund trustee that holds its fund’s assets, has to meet ASIC’s financial requirements for custody providers. Those requirements distinguish two cases:

A full custody provider must hold net tangible assets (NTA) of the greater of $10 million or 10% of average revenue.
An incidental provider — broadly, a licensee whose custody activity is confined to the assets of a scheme it operates - faces a much lower figure: the greater of $150,000 or 10% of average revenue.

At least half of the required NTA must be held in cash or cash equivalents, and the whole of it in liquid assets.

‍

In-House Trustee vs External Professional Trustee

With the structure settled, the only decision left is who your fund trustee should be.

Set up your own corporate trustee

You incorporate a company, usually a special-purpose one that does nothing else, and it acts as trustee of your fund. You control it, you appoint its directors, and there is no third-party trustee fee.

What you take on: the licensing question above, in your own name; the financial requirements attaching to whatever authorisations that licence carries; directors who personally carry the governance obligations of a trustee; and the cost and time of an AFSL application if you do not already hold one.

There is also a liability point that emerging managers routinely miss. A trustee is normally entitled to be indemnified out of trust assets for liabilities properly incurred, and that indemnity is what stands between the trustee’s directors and the fund’s obligations. Where that right of indemnity has been lost or cut back — including by a term of the trust deed that denies or limits it — section 197 of the Corporations Act can make the directors personally liable for liabilities the trustee company cannot discharge [8]. Insufficient trust assets alone will not trigger it; a badly drafted indemnity clause, or conduct that forfeits the indemnity, can. This is a reason to have the deed reviewed by someone who does this often.

Appoint an external professional trustee

The manager engages a licensed trustee that already holds the authorisations, the capital and the operational infrastructure, and acts as trustee across a number of funds.

What you get: a launch timeline measured against document turnaround rather than an ASIC licence queue; an existing compliance framework; a party independent of the manager holding the assets, which institutional and family-office investors increasingly expect; and no requirement to fund an NTA balance yourself.

What you give up: some control. An external trustee has its own risk appetite and its own obligations to every other fund it acts for. It can decline a transaction, ask for documentation you consider unnecessary, or take a slower view of an unusual asset. That friction is largely the point — it is the same independence your investors are relying on — but it is real, and worth testing before you sign.

What to look for in a trustee provider

Authorisations that match your fund. Confirm the licence covers dealing in interests in your kind of scheme, and confirm separately who is authorised to hold the assets.
Custody arrangements you can see. Who holds the assets, under what agreement, and against which financial requirement.
Capacity for your asset class. Illiquid and unusual assets are where trustee arrangements come under strain. Ask what they already hold.
The deed terms that bind you. Indemnity, limitation of liability, removal, and fee escalation. Read these before the commercial terms.
An exit path. How the trustee retires or is removed, what it costs, and how long it takes.

‍

Retiring or Replacing a Trustee

One genuine advantage of the trustee model is that changing your mind is possible. Retirement and removal are governed by the trust deed, supplemented by state trustee legislation, and typically run through a deed of retirement and appointment (DORA) that transfers legal title to the incoming trustee.

That is not the same as being easy. Every asset held in the trustee’s name must be transferred, which can mean share transfers, title dealings, novated contracts, and new bank mandates, with stamp duty consequences in some states. Outgoing trustees also commonly retain a lien over trust assets for liabilities incurred while in office. Read the removal clause before you need it.

‍

How FundBase Group Supports Trustee Arrangements

FundBase Group (FB Corp Limited, ABN 16 675 876 490, AFSL 557810) provides trustee services for Australian funds alongside the operating functions around the role, so the trustee, the registry, and fund accounting are not three separate relationships to coordinate.

AFSL coverage without building your own licensee. For managers whose economics do not support their own licence application, FundBase Group provides coverage under a Corporate Authorised Representative arrangement, with the training and supervision that arrangement requires.

Fund formation and the documents underneath it. Trust deed, investment management agreement, subscription documents and the service agreements the trustee signs, prepared as one set rather than assembled from separate advisers. See Fund Services for the full scope.

Investor onboarding and registry. Digital applications, KYC and AML/CTF support, and ongoing investor administration run through the FundBase technology platform, with the unit register maintained as the trustee’s record rather than a spreadsheet held by a third party.

‍

Getting Started

If you are working out whether to stand up your own trustee company or appoint an external one, the useful starting point is a conversation about your investor base, your asset class and your launch timeline — in that order, because each one narrows the next.

Contact FundBase Group to discuss your fund structure and trustee requirements.

‍