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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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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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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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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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