operations workshop - alfi · and/or distribution operations as key partners to support and enhance...
TRANSCRIPT
Operations Workshop
Hong Kong, 11th November 2010
Sophisticated infrastructure to support globally
distributed funds
Moderator: Josée – Lynda Denis, BNY Mellon
Steve Bernat, Citibank
Gert Rautenberg, Brown Brothers Harriman
Philippe Seyll, Clearstream
3
Agenda
Introduction
1. Luxembourg’s evolving global infrastructure
2. Global Distribution Support – a unique evolution
3. Building bridges with Hong Kong and Asia
4
From manufacturing to cross-border distribution
Servicing Challenge – The Cross Border Business Model
Asset Asia Distribution
Channels
Asia
Service Centres
UK
US
EU
South
Korea
Taiwan
China
Singapore
Hong Kong
Domicile &
Fund Servicing
Centre
Asset Management Asia Distribution Channels
Asia Fund Services Centres
Investors
& Distributors
UK
US
EU
South
Korea
Taiwan
China
Singapore
Hong Kong
Luxembourg
Singapore Singapore
Hong Kong Hong Kong
Japan
(Central administration)
China
Taiwan
South
Korea
China
Singapore Singapore
Hong Kong Hong Kong
Japan
Vietnam
The Day of a UCITS Fund has more than 24 Hours
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
20 21
22
23
24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
20 21
22
23
24
Europe
CET Timing Day 1
CET Timing Day 2
Europe
Subscription/Redemption Cut-off
NAV Release
Valuation Point
Americas
Japan
Asia
Middle East
Americas
Japan
Asia
Order Processing Batch Processing
In/Out Cash Flow Confirmation Correspondence Processing
Account Opening Order Booking Client Servicing
In/Out Cash Flow Estimation
Middle East
Depending on the cut-off time, valuation point and the promoter’s distribution strategy, certain functions and
processes may have to be performed in other regions
Source: ALFI TA Forum – Global TA WG 2009-2011
Cross-Border Fund Servicing Luxembourg – A Global Fund Services Center
Making Fund Global Distribution Support Happen
6 am
EST
12 pm
CET
6 pm
HKT
Luxembourg
Domicile & Central Administration
Fund
Services
Hub
Real Time Updates
Real Tim
e Update
sRTU
Real Time Updates
Fund
Services
Hub
Fund
Services
Hub
Fund
Services
Hub
6 am
EST
12 pm
CET
6 pm
HKT
Luxembourg
Domicile & Central Administration
Fund
Services
Hub
Fund
Services
Hub
Real Time Updates
Real Tim
e Update
sRTU
Real Time Updates
Fund
Services
Hub
Fund
Services
Hub
Fund
Services
Hub
Fund
Services
Hub
Fund
Services
Hub
Fund
Services
Hub
• Global Operating
models, but local
servicing
• Access to local market
expertise within
timezone and local
language
• Superior service taking
into account local
market practices
• Sophisticated
technology
infrastructure to ensure
Asian clients have
access to up-to-date
information
8
Global fund services and global distribution support
Investment Fund Sub-advisors
Fund/Investment Mgr
Broker
Management Company
/Promoter
Lawyers
Regulatory
Authorities
Auditors
Trustee / Depositary
Paying Agent / Clearing
Custodian/ Depository
Bank
Communication Agent
Fund Admin./Fund Accounting
Distributors Investors
Transfer Agent
Distributors Distributors Distributors
Authorities
Authorities Regulatory
Authorities
GLOBAL DISTRIBUTION SUPPORT SERVICES
The evolution of the Luxembourg IM business model
GLOBAL FUND SERVICES
Source: ALFI TA Forum – Global TA WG 2009-2011
9
Mission Statement
The ALFI TA & Distribution Forum liaises with the Luxembourg TA & Distribution Forum
community and other related communities and associations in the world bringing together
industry peers to share experiences and discuss issues related to global fund distribution
operations, specifically those topics affecting Global Transfer Agency and Global
Distribution Support Services.
It aims to build a bridge between the asset managers & their fund distributors and
Luxembourg’s Asset Servicing practitioners community, focusing on the Transfer Agent (TA)
and/or Distribution Operations as key partners to support and enhance the global fund
distribution of Luxembourg-domiciled funds.
Its main intent being to enhance the ease of doing business
in Luxembourg domiciled investment products
from a global cross-border fund distribution support perspective.
10
ALFI TA Forum today
SOUNDING BOARD
The Luxembourg
TA & Distribution Forum
(launched in 1999)
145 participants
92 organisations
24 nationalities
Across 14 countries/regions
Chairwoman Josée-Lynda Denis
(BNY Mellon)
ALFI Coordinator François Drazdik
BBH Gert Rautenberg
BGL BNP Paribas Thierry Detz
BNP Paribas Securities Services Pierre Mottion
CACEIS Investor Services Caroline Prosperi
Etienne Carmon
Citigroup Steve Bernat
Clearstream Brenda Bol
HSBC Securities Services Roberto Ricci
KNEIP Communication Mario Mantrisi
PricewaterhouseCoopers François Génaux
Schroders Investment Management Gary Janaway
S.W.I.F.T. Michèle de Boe
Victor Buck Services Nicolas Buck
TA Forum
11
HKIFA/Hong Kong Investment Funds Association
HSBC Securities Services
i-flex solutions ltd
ICI IOAC/International Operations Advisory Committee
IFBL/Institut de Formation Bancaire Luxembourg
IKANO Luxembourg
Information Mosaic
ING Luxembourg S.A.
ICI/Investment Company Institute, US
ISSA /International Securities Services Association
KNEIP Communication S.A.
Kredietbank Luxembourg
Lettershop S.A. Luxembourg
MFS International Limited, UK
MFS International Limited, US
Morgan Stanley Investment Management Ltd
Moventum S.A.
M&G Investments London
Nordea Bank S.A. - Investment Funds Luxembourg
Northern Trust Luxembourg Management Company
PFPC International Inc. Ireland
Pioneer Investment Management Ltd, Ireland
PricewaterhouseCoopers
PRISMA Sàrl
RBC Dexia Investor Services Bank Luxembourg
RBC Dexia Investor Services Belgium
RIVA Financial Systems
Robeco Asset Management Rotterdam
Schroders Investment Management Luxembourg
Silica Fund Administration Systems, South Africa
Standard Life Investments (Scotland)
State Street Bank (Luxembourg) S.A./IFDS
Sungard Germany
Superfund Luxembourg S.A.
S.W.I.F.T.
Swiss Risk Ag Frankfurt
TALK Finance
Threadneedle
UBS Fund Services Luxembourg S.A.
Unicredit Group, Austria
Unico Investment
Victor Buck Services
Vistra Fund Services
William Blair
The Luxembourg TA & Distribution Forum 145 participants, 92 organisations, 24 nationalities across 14 countries/regions in the world
12
HKIFA/Hong Kong Investment Funds Association
HSBC Securities Services
i-flex solutions ltd
ICI IOAC/International Operations Advisory Committee
IFBL/Institut de Formation Bancaire Luxembourg
IKANO Luxembourg
Information Mosaic
ING Luxembourg S.A.
ICI/Investment Company Institute, US
ISSA /International Securities Services Association
KNEIP Communication S.A.
Kredietbank Luxembourg
Lettershop S.A. Luxembourg
MFS International Limited, UK
MFS International Limited, US
Morgan Stanley Investment Management Ltd
Moventum S.A.
M&G Investments London
Nordea Bank S.A. - Investment Funds Luxembourg
Northern Trust Luxembourg Management Company
PFPC International Inc. Ireland
Pioneer Investment Management Ltd, Ireland
PricewaterhouseCoopers
PRISMA Sàrl
RBC Dexia Investor Services Bank Luxembourg
RBC Dexia Investor Services Belgium
RIVA Financial Systems
Robeco Asset Management Rotterdam
Schroders Investment Management Luxembourg
Silica Fund Administration Systems, South Africa
Standard Life Investments (Scotland)
State Street Bank (Luxembourg) S.A./IFDS
Sungard Germany
Superfund Luxembourg S.A.
S.W.I.F.T.
Swiss Risk Ag Frankfurt
TALK Finance
Threadneedle
UBS Fund Services Luxembourg S.A.
Unicredit Group, Austria
Unico Investment
Victor Buck Services
Vistra Fund Services
William Blair
The Luxembourg TA & Distribution Forum 145 participants, 92 organisations, 24 nationalities across 14 countries/regions in the world
13
TA Forum
TA Forum Steering Committee
TA Operations WG
1. Standardisation
2. Global Distribution Support/Global TA
3. Alternative Investments Operations
4. Best Practices
5. TA Training Programme
6. TA Regulatory
7. TA Reporting
Communication WG
1. Communication WG
Luxembourg TA & Distribution Forum
2. Events
TA Forum website
TA Newsflash
Articles
3. Industry Associations: Building Bridges
8. Industry Issues & Developments
TA Forum structure
14
ALFI TA Forum
TA Forum Steering Committee
TA Operations WG
1. Standardisation
2. Global Distribution Support/Global TA
3. Alternative Investments Operations
4. Best Practices
5. TA Training Programme
6. TA Regulatory
7. TA Reporting
Cooperation with other industry associations
As applicable
ALFI Human Resources & Training Committee
ALFI/ABBL Depository Forum, ABBL Securities WG
EFAMA FPSG, ALMUS, Findel Group, AFAC, …
IFBL Cercle de Qualité - Transfer Agency
EFAMA FPSG – FPP, DMFSA,…
SWIFT Hedge Fund Automation WG
8. Industry Issues & Developments As applicable: ECB, ABBL, ALCO, NUG, Building
Bridges, Industry task forces, etc.
Operations WG
15
Drivers of change in the Operating Model of the
Luxembourg fund industry
2011
2012
2013
2014
UK Retail
Distribution
UCITS IV
European
Retail
Distribution
AIFM Depositaries
T2S
AI
Convergence Investor
Focus
Global
Distribution
More
Industry
Devs.
LuxCSD
MFiD
Review
Supervisory
Convergence
Regulatory
Convergence
PSD
FPP
DMFSA
…
Source: PricewaterhouseCoopers, Regulatory Update - ALFI TA Forum 2009
1. Luxembourg Funds Operating Model:
i. LuxCSD (2010) and Target 2 Securities (2014)
i. ECB T2S For Funds Workshops: April and June 2010
ii. T2S For Funds Luxembourg: T2S NUG
iii. ALFI TA Forum: Lux CSD/T2S WG
ii. Fund services delivery: Global Distribution Support versus Global TA
iii. Products: Alternative Investments versus long-only
iv. Regulatory requirements and developments
v. Marketing and communication: ALFI roadshows, brochure
2. TA Reporting
i. FATCA
ii. KID TA
iii. DMFSA
iv. Investor Compensation Scheme
Current priorities and road map 2010-2011
3. Standardisation and automation – what next?
i. Joint EFAMA-SWIFT Fund Processing Standardization Report -
Mid-year 2010 status: Luxembourg and Ireland
ii. EFAMA FPSG: FPP, Corporate Actions, Single leg transfers, T2S
For Funds WG, FPP
4. Building Bridges - Asia
i. ALFI TA & Distribution Forum Asia: launch 1st quarter 2011
ii. ALFI/HKIFA Cooperation Agreement: launch November 2010
iii. Singapore and Taiwan: 2011
5. Regulatory
i. AML EU Directive and AML Luxembourg Law: GTA/GDS impact
analysis and guidance
ii. UCITS IV
iii. AIFMD
iv. Other countries’ regulatory developments:
- USA: FATCA
- UK: Retail Distribution Review
Current priorities and road map 2010-2011
Listening to investors Listening to investors 1. Luxembourg’s
Evolving
Global Infrastructure
Local Servicing using a Common Service Provider (Model 1)
Tasks of Sub-transfer Agent (1)
Point of Contact for local customers
Collection of client documents and
orders
Follow-up with the investor/distributor
on NIGO orders
Processing of client instructions
(i.e. system input)
Collection of subscription monies and
payment of redemption proceeds for
local customers
Reconciliation of local collection
accounts
Cash flow forecast/significant fund
movement reports
Local client reporting
Model: The official Transfer Agent has
delegated certain tasks to a regulated
entity within its organisation or to a
third party, but responsibility remains
with the official Transfer Agent.
Responsibility of Official Transfer Agent:
Ultimate AML / KYC responsibility (possible to delegate to a regulated entity in a country
with equivalent identification requirements and with appropriate contract that governs the
mandate)
Oversight responsibility on work performed by the support center (regular due-diligence
required)
Data/Transaction processing (i.e. issuance/destruction of units)
Processes such as dividend processing, trailer fee calculation are usually centralised with
the Transfer Agent
Cap stock reporting to Fund Accounting
(1) The tasks of the sub-TA depend
on the tasks the official Transfer
Agent has delegated to its support
centre and as such can vary by
Transfer Agent and client.
6 am
EST
12 pm
CET
6 pm
HKT
Central Transfer Agent
Sub Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent
Source: ALFI TA Steering Committee 19
Local Servicing using Financial Intermediaries (Model 2)
UCITS
Funds
Financial
Intermediary
6 am
EST
12 pm
CET
6 pm
HKT
Financial
Intermediary
Financial
Intermediary
Financial
Intermediary
Responsibility of Official Transfer Agent:
No oversight responsibility on the FI, as the FI has been formally appointed by the fund
Maintenance of a nominee account for the FI
Processing of consolidated orders received from the FI
Data consolidation to provide consolidated reporting to fund promoter
Model: A financial intermediary (FI)
has been appointed by the fund. The
FI keeps a separate register and
appears on the main register of the
fund as a nominee.
Tasks of Financial Intermediaries:
Point of contact for local customers
Collection of client documents and
orders
AML / KYC responsibility
Validation and processing of client
instructions
Collection of subscription monies
and payment of redemption proceeds
for local customers
Reconciliation of local collection
accounts
Local client reporting
Processes such as dividend
processing or trailer fee calculation
that would usually be centralised are
performed locally
Source: ALFI TA Steering Committee 20
Shared Usage of One TA System (Option 1)
Central
Transfer
Agent
Real Time Updates
Support
Centre
Central Transfer Agent (Holds Shareholder Register)
Local Service Centre with Systems Access
Support Centre Provides IT Support and Developments Software
Sub Transfer Agent’s\Service Centre Utilise the Same Systems Instance
Support Centre Performs Non Client Facing Services (Reconciliations and Controls)
6 am
EST
12 pm
CET
6 pm
HKT Typical Features
Sub Transfer Agent’s are more
commonly appointed in countries East
of Luxembourg
The Central Transfer Agent may
delegate the pricing process to a Sub
Transfer Agent in the America’s
Common to hold one database with full
client records, with
segregated/restricted access for sub
Transfer Agents
STP orders are normally sent directly to
the Central Transfer Agent
In Europe and the America’s Sub
Transfer Agent’s are appointed to
access domestic fund trading
systems/to comply with local regulation
Common batch updates are typically
run by the central Transfer Agents
(daily pricing, dividends, end of day
processes)
Generally easier to upgrade systems
and maintain them, though less tolerant
of systems down time
Necessary steps should be taken to
ensure that data protection is provided
for in all jurisdictions
Data centres hosted outside
Luxembourg are subject to CSSF
approval, rigorous security and access
controls
Data extracts generated centrally are
transferred to Sub Transfer Agents for
printing and despatch locally
Sub Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent
Source: ALFI TA Steering Committee
21
Independent TA Systems Processing in Parallel (Option 2)
Financial
Intermediary
Separate Systems
Financial
Intermediary
Financial
Intermediary
Financial
Intermediary
Separate Systems
Separate Systems Separate Systems
Support
Centre
Central Transfer Agent (Holds Shareholder Register)
Local Service Centre (FI) Operating Separate Systems
The FI Might also be Appointed as a sub Transfer Agent or/and a Distributor
Support Centre may Perform Non Client Facing Services (Reconciliations and
Controls)
Support Centre Provides IT Support and Acts as a Software Developer
6 am
EST
12 pm
CET
6 pm
HKT Typical Features
The Central Transfer Agent IT and non client
facing support might be in Luxembourg or in an
offshore site
Financial Intermediary (FI) often has a dual role
as Sub Transfer Agent and Distributor
FI updates their system using prices and
dividend rates provide by the Central Transfer
Agent in parallel OR
FI receives files with priced trades and updated
positions post pricing and dividend processing
from Central Transfer Agent loads data into
their system
FI produces and dispatch contract notes and
Statements and Valuations locally
Central Transfer Agent can upgrade their own
system without the need for parallel changes to
the FI’s systems
Attention required to any changes to file
formats or data content sent by the Central
Transfer Agent to FI
Where parallel pricing and dividend updates run
in parallel there is a risk of rounding differences
The FI is highly dependant on the Central
Transfer Agent providing essential processing
data on a timely basis
Data protection is less of an issue as the
initiation of data is generated by the FI and this
should be reflected in contractual agreements
Central Transfer Agent must have sufficient
access to the FI’s Sub Register to assume
business operations should the FI fail for any
reason
Each FI should have sufficient DR capabilities
and plans established and maintained
Central
Transfer
Agent
Source: ALFI TA Steering Committee
22
Global Banking and Clearing Network Systems
Transfer
Agent
FX instruction HKD/USD
Local HKD
Settlement
USD wire instruction
Local USD
Settlement
FI vs. TA
Local USD
Settlement
TA vs Custody
6 am
EST
12 pm
CET
6 pm
HKT Typical Features
Luxembourg funds are denominated in
all major currencies
The Transfer Agent will need to appoint
a bank who can offer services in each
currency
Banks provide coverage via bilateral
agreements with other banks operating
in countries where they have no
presence
Institutional and sophisticated investors
typically have the capability to handle
cross border payments
Retail investors require local access to
accounts in different currencies for
settlement purposes
For example, Promoters who distribute
to retail clients in Hong Kong will need to
set-up accounts in €, £,$ etc. in Hong
Kong to avoid FX processing by the FI
It is common for sub transfer agents or
financial intermediaries to operate local
accounts on behalf of the Transfer Agent
Where the relevant Central Bank is
closed for holidays, settlement delays
may be experienced
Example of Same Day Connectivity
Investor in Hong Kong buys a Luxembourg based USD denominated fund with local settlement in
HKD where the FI is responsible for the FX
FX and Wire instruction by FI
USD settlements locally
Source: ALFI TA Steering Committee 23
2. Global Distribution
Support
- A Unique Evolution
FROM PAST TO PRESENT FOCUS
1. What does GDS mean for your organisation?
2. What is GDS really all about?
3. How has GDS evolved over the last 2-5 years?
4. What are the typical Asset Managers’ requirements
for GDS today?
5. What are the main differentiators between servicing
AI versus long-only products in the GDS space?
Prime TA® is designed to assist fund promoters in achieving their international distribution objectives. It
groups several services for the asset manager and distributor including legal support, order routing, distribution
network management, commission calculation & payment, and online reporting.
Our group transfer agency platform, with multi-channel interfaces and on-line trading and reporting facilities,
provides consolidated data which allows the asset manager to monitor more accurately the distribution activity
of the entire fund range.
And with a network of offices across Europe, North America, Bermuda and Asia, we have the local knowledge
and cultural understanding to provide adapted services to local distributors and investors.
Global Distribution Service is designed to provide the right solution in the right market to our alternative and
traditional Fund clients across the globe.
With a global transfer agency platform operating in all of the main regions we can provide solutions to the
key challenges of global distribution; fund registration, distributor linkage, regulatory/tax reporting, trail
commissions, local time zone and language support.
Leveraging flexible technology, automation, local expertise and global management our distribution service is
designed to free up our clients to concentrate on what they do best.
GDS Mission Statements
26
“The provision of centralised Global Distribution Support Services, thereby extending the reach of our clients into
new markets, removing the constraints of multiple time zones, distribution channels and systems, available
anywhere and anytime in the world.”
As part of our understanding of the requirements for Global Distribution Support in parallel to our Global Transfer
Agency service offering across six key global fund servicing hubs in the world in the Americas, Europe and Asia, we
have identified a value chain that helps to deliver to Fund Promoters’ concept of entering into new markets through
to actually supporting the Distributors’ and their end investors servicing in any jurisdiction in the world.
Our Global Distribution Support Services are deployed through 3 key components and corresponding services which
extends our overall global fund services delivery and reach to our Asset Manager clients and their Distributors
businesses from facilitating the distribution strategy, providing and maintaining the distribution infrastructure to
ongoing Distribution network Management.
The Global Distribution Service is designed to be a "distribution enabler" providing full service solutions
to fund promoters and fund buyers.
We help the fund promoter address the challenges in establishing worldwide distribution of their products.
Our globally deployed service includes market entry and regulatory assistance, distributor connectivity,
trailer fee servicing, and support to the fund promoter and their sales offices in their region and language.
For the fund buyer our single platform provides automated order routing, trailer fee support and includes
a variety of stock selection and asset allocation tools.
Utilising our local expertise and global footprint the global distribution service goal is to bring the fund
promoter and the fund buyer closer together and improving the bottom line revenue for both.
GDS Mission Statements
27
We understand that distribution drives our client’s business. As asset managers seek to expand into new
markets, our Distribution Support Service leverages our global infrastructure and local market expertise
in over 100 countries to help our clients achieve their business growth objectives.
Based around dedicated Distribution Support centres in Europe, The Americas, and Asia, providing local
language, market expertise and time-zone support, with scalable technology including online trading and
reporting facilities, our Distribution Support teams manage relationships with over 2,000 distributors in over
60 countries, providing the following core services: Assistance with market entry strategy, Fund registration
Introduction to new distribution channels, Order routing, Distribution network management, Regulatory/Tax
reporting, Commission calculation and payment, Flexible reporting for Distributors and Investors.
GDS Mission Statements
28
In the past, TA’s were pure processing agents,
considered as the back-office of the fund
administration back-office. Now, the TA function
it is considered the most front office of back
office
With the UCITS “success story”, funds are now
distributed across Asia, the Middle East, the
Americas with further expansion within Central
and Eastern Europe
As a result TA’s nowadays are actively
supporting distribution, which has created a
number of challenges for them
– Servicing investors locally in the major time
zones
– Often moving from a single site to multiple
site servicing model
– Creation of new processes and operating
models including IT
Transfer Agency Services – Today’s Global Giant!
29
Global Fund Distribution – Impact on Service Offering
TA’s are moving up the value chain and are expanding their service offering
– TA’s have evolved from being a pure processing agent to an enabler for asset managers to
expand their business by growing assets, which positions them closer to the distribution space
– Asset Managers enter new markets, where distributors lack the required infrastructure (e.g.
MENA) – TA’s are forced to take on more distributor back-office processes and functions and also
have to support the technology infrastructure
– TA’s are taking over a increasing number of distributor back-office processes and functions (e.g.
negotiation of distribution agreements, technology infrastructure) – The crisis has kicked-off
another outsourcing wave and this trend will continue
The emergence of Specialised Service Providers
– TA’s focus has shifted, which is why they are outsourcing processes they have previously
managed in-house (e.g. trailer fees, middleware)
The evolution of STP rates for third party fund distribution
– Low increase in STP rates – STP rates will increase in mature markets, but are offset by lack of
automation in new markets, where cross-border funds are distributed
– On the other hand, platforms within countries will most likely be a lot more prominent going
forward, consolidating orders prior to sending to the TA’s (e.g. Hong Kong – HKMA) and as such
the transaction volume should decrease
A number of challenges have to be addressed to successfully service a global customer base
30
Who is the Investor?
31
Fund
Transfer Agent
Americas Europe Asia
Sub TA Sub TA Sub TA
Platform Platforms Platforms
Banks Banks Banks
Investor Investor Investor
• Major challenge today is identifying the investor, as they are moving further away from the fund and TA
• Promoters are required to place even greater emphasis on their relationship management process
• Service is required where distribution and sales occur
• Need for data/information has never been greater in order to best service the investor
Source: ALFI Spring conference March 2010 – Around the world in 24 hours, presented by Geoff Cook, BBH
The Expanding Transfer Agency Value Chain
The TA’s have changed focus!
Investor
Servicing
• KYC / AML
review
• Account
opening
• Shareholder
account
maintenance
• Ongoing review
of client files
• Compliance
checks
e.g. transaction
trend
monitoring
Distribution
Support
• Distributor
relationship
management
• Distributor on
boarding
• Sales and
marketing support
• Commission and
trailer fee
processing
• In-region
servicing support
(Europe, Asia,
Americas)
• Registration
assistance
Trade
Processing
• Transaction
processing
and account
maintenance
• Dividend
distribution/
re-investment
• Shareholder and
Distributor
reporting
• Cash flow
projections
• Asset manager
cash flow
reporting
Cash
Management
• Fund cash
movements
• Shareholder
and Distributor
payments
• Reconciliation
of collection
accounts
• Foreign
exchange
handling
Information
Delivery
• On-line data
access
and reporting
• Customized
reporting
• Customized
data feeds
• Consolidated
data warehouse
(e.g. consolidated
data across
jurisdictions)
• Executive MIS
Distributor
Back-Office
• Negotiation
of distribution
agreements
• Sales Reporting
• Commission
schemes
• Collection of
orders
• Technology
Infrastructure
Asset Mgmt
Support
• Product design
(e.g. side pockets)
• Liquidity / Cash
Solutions
• Distribution
network mgmt.
Tomorrow’s
Focus
Yesterday’s
Focus
Today’s
Focus
Today’s
Focus
Tomorrow’s
Focus
Core
Services
Expanding
Services
Expanding
Services
32
Global Fund Distribution – Impact on Operating Models
Major Impacts of the Increasing Volume of Cross-border Trades
76%
59%
53%
53%
Increased Exposure to Operational Risk due to
Increasing Pressure on Daily Operations
Increased Difficulty to Recruit and Retain
Adequate Resources in Terms of Quantity and
Quality (Experience and Competencies)
Increased Pressure on the IT Architecture to
Sustain the Volume of Trade Generated and to
Efficiently Handle the New Investment Products
Increased Exposure to Compliance Risk
A number of challenges have to be addressed to successfully service a global customer base
TA’s have started to offshore processes
and functions for efficiency gains and
cost savings – UCITS IV may speed up
this process
Distribution has an impact on future
operating models, however, they are
just an evolution of today’s global
distribution support models (i.e.
additional client support centres will
have to be added)
The difference in culture and client
mentality is an education process that
is not to be underestimated
Operational procedures and controls
have to be adapted to reduce the
increased risk
Staff needs to be trained to understand
different market requirements, but also
has to change mentality to support
shared operating models
Significant Technology enhancements
may be required to support cross-
border fund distribution 33
CURRENT FOCUS
1. What are the new/emerging frontiers for cross-border
distribution?
2. Do you anticipate major changes in the GDS service
offering in line with the two emerging roles of the
“official TA” and “regional TA”?
UCITS - The Journey 2003
Source: ALFI Spring conference March 2010 – Around the world in 24 hours, presented by Geoff Cook, BBH
Source: Global Fund Distribution Poster 2003 - PwC
UCITS - The Journey 2010
36
Source: ALFI Spring conference March 2010 – Around the world in 24 hours, presented by Geoff Cook, BBH
Source: Global Fund Distribution Poster 2003 - PwC
UCITS - The Journey 2015?
37
Source: ALFI Spring conference March 2010 – Around the world in 24 hours, presented by Geoff Cook, BBH
Source: Global Fund Distribution Poster 2003 - PwC
Growth in Distribution of Off-shore Funds – Predictions 2015
China and Brazil are the two major high growth prospects
High – Brazil and China.
Medium – Turkey, Jordan, Kuwait, Saudi Arabia, Bahrain, U.A.E., South Korea and Taiwan.
Emerging – Mexico, Egypt, Malta, Bulgaria, Slovenia, Hungary, Czech Republic, Poland, Lithuania, Estonia, Latvia, Slovak Republic, Romania, India, Indonesia and Australia.
Middle East
Eastern
Europe Asia Pacific
LATAM
38
Local Servicing – Expansion to growth markets
6 am
EST
12 pm
CET
6 pm
HKT
Central
Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent Sub Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent
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Regional Servicing – Follow the sun model
6 am
EST
12 pm
CET
6 pm
HKT
Central
Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent Sub Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent
Sub Transfer
Agent
Regional
Client-
support
Operational
support
Regional
Client-
support
Central Transfer Agent (Holds Master Shareholder Register)
Local Sub TA with remote access to Central TA system or local purpose fit system
Regional Support Centre provides Client and Operational/IT Support for region
Sub TA’s could connect remotely to master register or connect the local system with real time
messaging
Internal work- and data flows enabling the regional support centre
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TOMORROW’S FOCUS
1. How will UCITS IV change and/or enhance the GDS
value chain in future?
2. Any other regulatory and industry developments on
the horizon that will impact GDS in the near future?
Listening to investors Listening to investors 3. Building Bridges
with Hong Kong and Asia
Luxembourg funds’ Servicing and Administration in Asia
Luxembourg service providers based in Asia
BNP Paribas Securities Services
BNY Mellon Asset Management and BNY Mellon Asset Servicing
BBH
Citi
CACEIS
European Fund Administration
HSBC Securities Services
KNEIP
RBC Dexia Investor Services
State Street Bank/IFDS
Société Générale
Victor Buck Services, etc.
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To build bridges with the key markets that are promoting, distributing and
servicing Luxembourg-domiciled funds
Background History
Market intelligence gathering since 2007 by ALFI TASC members during various Asia
tours (ALFI, EFAMA, LFF, Fund industry conferences, etc.) and individual ALFI TASC
member organisations’ business development endeavours across Asia:
Target « mature » markets and key participants in the growth of Luxembourg-
domiciled funds over the last 15-20 years: Hong Kong, Taiwan, Singapore, Japan
Local requirement for fostering knowledge sharing of common subjects affecting
local/regional business development for Luxembourg UCITS in Asia
Luxembourg ALFI TASC member organisations and their Asia counterparts
committed to support a dedicated ALFI TA Forum Asia
The ALFI TA Forum Asia concept positively received by key participants in Hong
Kong and Singapore through meetings held by practitioners during the LFF Asia
Tour 2009
Why a TA Forum Asia?
44
To build bridges with the key markets that are promoting, distributing and
servicing Luxembourg-domiciled funds in Asia
Background History
ALFI TA Forum Asia proposal instigated by Josée Denis in February 2009 following
discussions with HKIFA, IMAS and local organisations (e.g. Blackrock, Allianz, Invesco,
SWIFT, etc.) during various Asia tours since 2007
Meetings held with IMAS and HKIFA since 2007 on the topic
HKIFA now part of the Luxembourg TA & Distribution Forum community
Ongoing discussions with Investment Management Association Singapore (IMAS)
Why a TA Forum Asia?
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Objective & goals
To establish an alliance in order to instil a process of cooperative exchange.
The main goals on this alliance being:
To foster common understanding of our respective investment funds markets
and the service delivery requirements
To advance mutual education on hot topics affecting the fund industry
To address industry issues of mutual interest and/or benefit
To disseminate relevant information to the membership of our respective fund
industry associations
Why a TA Forum Asia?
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Proposal to ALFI Board 8 February 2010: Obtained acceptance and approval
to go ahead with Hong Kong, Singapore and Taiwan by 4Q2010-4Q2011
Formalise a cooperation agreement between associations – initiate with
HKIFA
DRAFT ALFI/HKIFA Agreement, Sept. 2010
Formalisation during ALFI Asia Roadshow November 2010
Establish an ALFI TA Forum Asia framework – see next
ALFI TASC Luxembourg ownership and coordination
Yearly ALFI TA Forum Asia – same as ALFI TA Forum in Luxembourg
Ongoing dissemination of relevant information via the ALFI TA Forum website
and TA News Flash
Hot Topics conferences, webinars, etc. - as applicable
Proposed approach
Why a TA Forum Asia?
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ALFI TA Forum Chairwoman Josée-Lynda Denis
(BNY Mellon)
ALFI Coordinator François Drazdik
BBH Local – Hong Kong
BNP Paribas Securities Services Local - Singapore
CACEIS Investor Services Local – Hong Kong
Citigroup Local – Hong Kong
Clearstream Banking Stanley Poon/Hong Kong
HSBC Securities Services Philippe Bonval/Hong Kong
KNEIP Communication Local – Hong Kong
PricewaterhouseCoopers Local – Hong Kong
Schroders Investment Management Local – Hong Kong
State Street Bank / IFDS Local - Singapore
S.W.I.F.T. Lisa O’Connor/Hong Kong
Victor Buck Services Patrick Seil/Singapore
SOUNDING BOARD
The Luxembourg
TA & Distribution Forum
Asia Participants List
TA Forum Asia
TA Forum
ALFI TA Forum Asia – Hong Kong
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Thank you for your participation.
50
Hong Kong, 11th November 2010
Questions?
Thank you for attending
51