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Managing the Operational challenges of Fund distribution

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

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  1. Confidential Managing the Operational challenges of Fund distribution ACSDA- Leadership Forum Buenos Aires Diego Pizzamiglio November 2011

  2. 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)

  3. 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

  4. 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

  5. Finland Sweden Ireland UK Netherlands Germany Luxembourg France Switzerland Italy Confidential The challenges of the European landscape

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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

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