Confidential Managing the Operational challenges of Fund distribution ACSDA- Leadership Forum Buenos Aires Diego Pizzamiglio November 2011 1
Confidential Euroclear Group World’s leading provider of post trade services Euroclear Group in 2010 AA+ rated Central Others Banks 2% 6% Custodians 25% Investment Managers 18% Broker/ dealers 49% • 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 Latin America Australia 1% 7% North America - 10% Fund. Settle Japan - 4% Europe 48. % Asia - 10% Africa - 1% Middle East – 7% UK 13% • More than 60, 000 mutual & hedge funds • Euroclear group CSD markets 63% of European funds market (AUM) 2
Trends in the fund industry Confidential European fund market • • Growth of the European fund market The dynamics of the growth: 1. Increase of X-border distribution 2. Increase of 3 rd party funds distribution 3. Moving from closed - to open but guided architecture 3
Confidential Evolution of European 3 rdparty Xborder activity * total assets 7. 5 trillion Assets United States (bio €) 9, 150 (bio €) % 2005 -2009 net sales (bio €) % Europe (UCITS only) 2010 net sales 5605* 171 738 Cross-border (LU-IE) 2, 405 221 129% 764 104% United Kingdom 590 55 32% 90 12% Other dom mkts 1, 171 -35 -20% -198 -220% France 1, 211 -73 -43% 99 -50% Germany 228 3 2% -17% • Continued shift to cross-border • Increasing importance of non-European markets for x-border sales 4
The challenges of the European landscape Confidential Finland Sweden Ireland UK Luxembourg France Netherlands Germany Switzerland Italy 5
Operational challenges of Fund distribution Buy side intermediaries Product definition Institutional investors Pension Funds FOF Multimanagers Retail investors Fund selection Banks Sales and marketin g Confidential Sell side Order Routin g Cash Settlem ent Asset servici ng Sharehol der services Fun d’b ank Sales & marketi ng Asset mgmt TA FMC° Fund platforms Custodians Brokers IFAs consolidators Value-added services Poor level of service Very high back-office costs High risks & sensitivity to volumes Value-added services 6
Operational challenges of Fund distribution Order Routing • agent identification • lack of standard procedure • manual handling of forms • cut off time Settlement • track receipt of confirmations • lack of standard format • manual handling • cash management Confidential Asset Servicing • manual reconciliation of positions, cash payments and trailer fees. • corporate actions Application form & order placement Fund Buyer • Reconcile balances • Corporate Actions Fund Seller Contract note • Shares Statement • Corporate Actions • Trailer Fees report Cash Pay Transfer Agent: • Registrar • Trailer Fees ments Fund cash correspondent 7
Operational challenge of open architecture Confidential Market requirement Buy side intermediaries Product definitio n Fund selection Banks Sales and marketin g B 2 B & B 2 C Fund platforms Custodians Brokers IFAs consolidators Value-added services Sell side Order Routin g Cash Settlem ent Asset servici ng Sharehol der services Fun d’b ank Sales & marketi ng Asset mgnt TA Need for a neutral market infrastructure Single entry point Automation Standardisation Low cost Low risk Straight through processing FMC° TA FMC° Value-added services 8
Confidential Order processing: Custodians and Institutional investors access to Fund. Settle Fund investor Fund. Settle (Commercial banks, Private banks, Fund Supermarket, …) Validation Order Trade date Shares credit/debit Confirmation Transfer agent selection Fund transfer agent Order confirmation Validation View orders to prepare payments Shares Cash • Execute cash payments for subscription • Collect cash for redemption Payment date cash credit/debit Fund cash correspondent 9
Confidential Order processing: Custodians and Institutional investors access to Fund. Settle Fund investor Fund. Settle (Pension Fund, …) Validation Order Trade date Shares credit/debit Confirmation Transfer agent selection Fund transfer agent Order confirmation Validation View orders to prepare payments Custodian Shares Cash • Execute cash payments for subscription • Collect cash for redemption Payment date cash credit/debit Fund cash correspondent 10
Confidential Order processing: Custodians and Institutional investors access to Fund. Settle Fund investor Fund. Settle (Multimanager, …) Validation Order Trade date Shares credit/debit Confirmation Custodian Shares Cash Custodian Transfer agent selection Fund transfer agent Order confirmation Validation View orders to prepare payments • Execute cash payments for subscription • Collect cash for redemption Payment date cash credit/debit Fund cash correspondent 11
Conclusion Confidential • 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 12
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