Managing the operational challenges of fund distribution
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Managing the Operational challenges of Fund distribution. ACSDA- Leadership Forum Buenos Aires Diego Pizzamiglio November 2011. Central Banks 6%. Others 2%. Custodians 25%. Broker/ dealers 49%. Latin America 7%. Investment Managers 18%. Australia 1%. North America - 10%.

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Managing the operational challenges of fund distribution

Confidential

Managing the Operational challenges of Fund distribution

ACSDA- Leadership Forum

Buenos Aires

Diego Pizzamiglio

November 2011


Managing the operational challenges of fund distribution

Central Banks

6%

Others

2%

Custodians

25%

Broker/ dealers

49%

Latin America

7%

Investment

Managers

18%

Australia

1%

North America - 10%

Japan - 4%

Europe

48.%

Asia - 10%

Africa - 1%

Middle East – 7%

UK

13%

Confidential

Euroclear Group

World’s leading provider of post trade services

Euroclear Group in 2010

AA+ rated

  • US$ 30 trillion of assets under custody

  • 150 million transactions settled, representing US$736 trillion in value

  • Domestic securities from 44 markets

  • Financial institutions from 90+ countries

  • Settlement in 53 currencies

  • More than 675,000 bonds, equities, DRs

FundSettle

  • More than 60,000 mutual & hedge funds

  • Euroclear group CSD markets 63% of European funds market (AUM)


Managing the operational challenges of fund distribution

Confidential

Trends in the fund industryEuropean fund market

  • Growth of the European fund market

  • The dynamics of the growth:

    • Increase of X-border distribution

    • Increase of 3rd party funds distribution

    • Moving from closed - to open but guided architecture


Evolution of european 3rdparty xborder activity

Confidential

Evolution of European 3rdparty Xborder activity

* total assets 7.5 trillion

  • Continued shift to cross-border

  • Increasing importance of non-European markets for x-border sales


The challenges of the european landscape

Finland

Sweden

Ireland

UK

Netherlands

Germany

Luxembourg

France

Switzerland

Italy

Confidential

The challenges of the European landscape


Operational challenges of fund distribution

Confidential

Operational challenges of Fund distribution

Buy side intermediaries

Sell side

Product definition

Fund selection

Sales and marketing

Order Routing

Cash Settlement

Asset

servicing

Sales & marketing

Asset mgmt

Shareholder services

Fund’bank

Institutional

investors

TA

Banks

Fund platforms

Custodians

Brokers

IFAs consolidators

FMC°

Pension

Funds

FOF

TA

FMC°

Multi-

managers

Retail

investors

TA

FMC°

Value-added services

Value-added services

Poor level of service

Very high back-office costs

High risks & sensitivity to volumes


Operational challenges of fund distribution1

Confidential

Operational challenges of Fund distribution

Order Routing

Settlement

Asset Servicing

  • agent identification

  • lack of standard procedure

  • manual handling of forms

  • cut off time

  • track receipt of confirmations

  • lack of standard format

  • manual handling

  • cash management

  • manual reconciliation of

  • positions, cash payments and

  • trailer fees.

  • corporate actions

Application form & order placement

Fund Seller

Contract note

Fund Buyer

  • Reconcile balances

  • Corporate Actions

  • Shares Statement

  • Corporate Actions

  • Trailer Fees report

  • Transfer Agent:

  • Registrar

  • Trailer Fees

Fund cashcorrespondent

Cash Payments


Operational challenge of open architecture market requirement

Confidential

Operational challenge of open architectureMarket requirement

Buy side intermediaries

Sell side

Product definition

Fund selection

Sales and marketing

Order Routing

Cash Settlement

Asset

servicing

Sales & marketing

Asset mgnt

Shareholder services

Fund’bank

TA

Banks

B2B & B2C Fund platforms

Custodians

Brokers

IFAs consolidators

FMC°

Need for a neutral market infrastructure

TA

FMC°

Single entry point

Automation

Standardisation

TA

FMC°

Value-added services

Value-added services

Low cost

Low risk

Straight through processing


Order processing custodians and institutional investors access to fundsettle

Confirmation

Order

Confidential

Order processing: Custodians and Institutional investors access to FundSettle

Fund investor

(Commercial banks, Private banks, Fund Supermarket,…)

FundSettle

Fund

transfer agent

Validation

Transfer agent selection

Order

confirmation

Trade date

Shares

credit/debit

Validation

View orders

to prepare payments

Shares

Fund cash correspondent

  • Execute cash payments for subscription

  • Collect cash for redemption

Cash

Payment date cash credit/debit


Order processing custodians and institutional investors access to fundsettle1

Confirmation

Order

Confidential

Order processing: Custodians and Institutional investors access to FundSettle

Fund investor

(Pension Fund,…)

FundSettle

Fund

transfer agent

Validation

Transfer agent selection

Order

confirmation

Trade date

Shares

credit/debit

Validation

View orders

to prepare payments

Custodian

Fund cash correspondent

Shares

  • Execute cash payments for subscription

  • Collect cash for redemption

Payment date cash credit/debit

Cash


Order processing custodians and institutional investors access to fundsettle2

Confirmation

Order

Confidential

Order processing: Custodians and Institutional investors access to FundSettle

Fund investor

(Multimanager,…)

FundSettle

Fund

transfer agent

Validation

Transfer agent selection

Order

confirmation

Trade date

Shares

credit/debit

Validation

View orders

to prepare payments

Custodian

Shares

  • Execute cash payments for subscription

  • Collect cash for redemption

Fund cash correspondent

Payment date cash credit/debit

Cash

Custodian

Custodian


Conclusion

Confidential

Conclusion

  • Industry now recognises the need for a pan European infrastructure in the fund industry

  • The industry is eager to solve market inefficiencies

  • Need for standardisation to automate, generating the necessary savings and support for the growth of the fund industry


Managing the operational challenges of fund distribution

Confidential


Managing the operational challenges of fund distribution

Confidential


Managing the operational challenges of fund distribution

Confidential


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