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Managing the Operational challenges of Fund distribution
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Confidential
Managing the Operational challenges of Fund
distribution
ACSDA- Leadership ForumBuenos AiresDiego PizzamiglioNovember 2011
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Euroclear GroupWorld’s leading provider of post trade services
• 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
Europe48.%
UK13%
Asia - 10%
Japan - 4%
North America - 10%
Latin America 7%
Middle East – 7%
Africa - 1%
Australia1%
Broker/ dealers
49%
Central Banks
6%
Custodians25%
Investment Managers
18%
Others2%
Euroclear Group in 2010AA+ rated
• More than 60,000 mutual & hedge funds
• Euroclear group CSD markets 63% of European funds market (AUM)
FundSettle
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Trends in the fund industryEuropean fund market
• Growth of the European fund market
• The dynamics of the growth:
1. Increase of X-border distribution2. Increase of 3rd party funds distribution3. Moving from closed - to open but guided
architecture
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Evolution of European 3rdparty Xborder activity
Assets 2010 net sales2005-2009 net
sales
(bio €) (bio €) % (bio €) %
United States 9,150
Europe (UCITS only) 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 -17%
* total assets 7.5 trillion
• Continued shift to cross-border• Increasing importance of non-European markets for x-border sales
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The challenges of the European landscape
Luxembourg
France
Netherlands UK
Sweden Finland
Switzerland
Italy
Germany
Ireland
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Sales and marketing
Product definition
Fund selection
Assetservicing
Cash Settlement
Order Routing
Poor level of serviceVery high back-office costs
High risks & sensitivity to volumes Value-added services
Banks
Fund platforms
Custodians
Brokers
IFAs consolidators
TA FMC°
TA FMC°
TA FMC°
Buy side intermediaries
Value-added services
Sell side
Shareholder services
Sales & marketing
Asset mgmt
Fund’bank
Institutional investors
Retail investors
Pension Funds
FOF
Multi-managers
Operational challenges of Fund distribution
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• Reconcile balances
• Corporate Actions
Application form & order placement
Fund cashcorrespondent
Cash Payments
Contract note
• Shares Statement• Corporate Actions• Trailer Fees report
• 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
Order Routing Settlement Asset Servicing
Operational challenges of Fund distribution
Fund Seller
Transfer Agent:• Registrar• Trailer Fees
Fund Buyer
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Confidential
Sales and marketing
Product definition
Fund selection
Assetservicing
Cash Settlement
Order Routing
Value-added services
TA FMC°
TA FMC°
TA FMC°
Value-added services
Shareholder services
Sales & marketing
Need for a neutral market
infrastructure
Asset mgnt
Banks
B2B & B2C Fund platforms
Custodians
Brokers
IFAs consolidators
Sell side
Low costLow risk
Straight through processing
Buy side intermediaries
Fund’bank
Operational challenge of open architectureMarket requirement
Single entry pointAutomation
Standardisation
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Fund cash correspondent
Fundtransfer agent
FundSettle
Order confirmation
Transfer agent
selection
Payment date cash credit/debit
Validation
Validation
Trade dateShares
credit/debit
Fund investor
(Commercial banks, Private banks, Fund
Supermarket,…)
Order
Confirmation
View orders to prepare payments
• Execute cash payments for subscription
• Collect cash for redemption
Order processing: Custodians and Institutional investors access to FundSettle
Cash
Shares
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Confidential
Fund cash correspondent
Fundtransfer agent
FundSettle
Order confirmation
Transfer agent
selection
Payment date cash credit/debit
Validation
Validation
Trade dateShares
credit/debit
Cash
Order
Confirmation
View orders to prepare payments
• Execute cash payments for subscription
• Collect cash for redemption
Order processing: Custodians and Institutional investors access to FundSettle
Fund investor(Pension Fund,…)
Shares
Custodian
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Confidential
Fund cash correspondent
Fundtransfer agent
FundSettle
Order confirmation
Transfer agent
selection
Payment date cash credit/debit
Validation
Validation
Trade dateShares
credit/debit
Fund investor
(Multimanager,…)
Custodian
Order
Confirmation
View orders to prepare payments
• Execute cash payments for subscription
• Collect cash for redemption
Order processing: Custodians and Institutional investors access to FundSettle
Cash
Shares
Custodian
Custodian
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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
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