Professional Documents
Culture Documents
Isj 048
Isj 048
Isj 048
Volume 7 No. 48
Investor Annual membership
www.ISJ.tv
Mad World?
The Outsourcing Jailbreak
Regulation -
EFAMA on UCITS
Profile -
Alan Brown of Schroders
Under the microscope -
The future of
Prime Brokerage
Fundamentals
Securities Services & Securities Lending for Funds, Managers and Investors
securities.bnpparibas.com
BNP Paribas Securities Services is incorporated in France with Limited Liability and authorised by the French Regulators (CECEI and AMF). BNP Paribas Trust Corporation UK
Limited and Investment Fund Services Limited are authorised and regulated by the Financial Services Authority. BNP Paribas Securities Services London Branch is authorised by the
CECEI and supervised by the AMF and subject to limited regulation by the Financial Services Authority. Details on the extent of our regulation by the Financial Services Authority
are available from us on request. BNP Paribas Securities Services is also a member of the London Stock Exchange.
ISJ |
www.ISJ.tv
Mad World?
The Outsourcing Jailbreak
Regulation -
EFAMA on UCITS
Profile -
Investor
Services
Alan Brown of Schroders
Under the microscope -
The future of
Journal
Prime Brokerage
Fundamentals
Securities Services & Securities Lending for Funds, Managers and Investors
Editor-in-Chief
Roy Zimmerhansl
roy.zimmerhansl@ISJ.tv
CONTENTS
Editor
Brian Bollen
brian.bollen@ISJ.tv
4 Swings Deutsche Bank, Bravura, SGSS
Advisory Board Chairman
and
Clive Gande
roundabouts Northern Trust
clive.gandeISJ.tv
Senior correspondent
Craig McGlashan
craig.mcglashan@2i.tv
US correspondent
John Sandman
8 Lead story Outsourcing Jailbreak,
John.Sandman@ISJ.tv
Special correspondents
Mad World?
Cherry Reynard
Design
Serena Ventrella
Head of sales
14 Under the The future of Prime Brokerage
Patricia De La Grange microscope
trish.delagrange@ISJ.tv
Account managers
Eradat Munshi
eradat.munshi@ISJ.tv 18 The ISJ profile Alan Brown of Schroders
CTO
Peter Ainsworth
peter.ainsworth@2i.tv
Managing director
Jon Hewson 22 Regulation EFAMA On UCITIS
jon.hewson@2i.tv
Publisher
Mark Latham
mark.latham@2i.tv
27 Technology MTF - Xtrakter
2i UK One Angel Wharf,
59 Eagle Wharf Road
London, N1 7ER, UK
Risk Management
T: +44 (0) 20 7183 7470
F: +44 (0) 20 7250 0350
1
ISJ48 full FINAL.indd 1 23/09/2010 13:21
contents Continued
ISJ |
Volume 7 No. 48
Investor Annual membership
ISJ |
Services GBP 249 - UK, ROW
USD 379 - America
Journal
EUR 286 - EMEA
www.ISJ.tv
Mad World?
The Outsourcing Jailbreak
Investor
Services
Regulation -
EFAMA on UCITS
Profile -
Alan Brown of Schroders
Under the microscope -
The future of
Prime Brokerage
Journal
Fundamentals
Securities Services & Securities Lending for Funds, Managers and Investors THE GLOBAL CUSTODY AND ASSET SERVICING INDUSTRY MAGAZINE
ISJ48 full FINAL.indd 1 22/09/2010 14:43
CONTENTS
N
30 Analyse this Information Mosaic
GR
42 ISJ Directory Directory of services NT
ac
Fundamentals
inf
tra
It
rec
Securities Services & Securities Lending for Funds, Managers and Investors
US
2 www.eFunds.tv For
E*TAS (Electronic Transfer Agency System) is a front-end web portal for investors,
fund managers and other interested parties to have real-time access to shareholder
information such as reporting and balances. E*TAS also allows for submission of
trades and changes to investor information such as bank details and address changes.
It includes a built-in communication tool that allows the administrator to send and
receive messages to and from E*TAS users. www.kogerusa.com
For more information, contact Koger at 1-201-291-7747 or visit our website at www.kogeusa.com.
4
ISJ48 full FINAL.indd 4 22/09/2010 14:44 Caceis
... and climbing.
Custody-Depositary / Trustee
Fund Administration
Corporate Trust
CACEIS benefits from an S&P AA- rating
www.caceis.com
Caceisfull
ISJ48 adv climb EN 203x267H.indd
FINAL.indd 5 1 14/08/09 17:06:31
22/09/2010 14:44
swings and roundabouts Appointments
Societe Generale
Securities Services
(SGSS) has appointed
Olivier Renault as
Country Manager for
Luxembourg, replacing
Michel Becker. Renault
will report to SGSS
Executive Management
and becomes a member of
the Executive Committee
of Societe Generale
Bank and Trust (SGBT),
in charge of Securities
Services.
Renault, 46, has a degree
from the Paris Graduate
School of Economics,
Statistics and Finance
(ENSAE). He began his
career as a consultant in
the banking sector before
being appointed Director
of Financial Control
for a services company
in France. He joined
Societe Generale Group’s
Human Resources
department in 1999
and was then appointed
Head of Clearing at SGSS
in France. In 2006, he
became Deputy Head
of SGSS S.p.A. in Milan
where, in particular,
he managed project
integration and synergies
with this subsidiary,
which was acquired by
Societe Generale that year.
32
Nordea Bank
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a broader horizon
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have your eyes set on a specific local market? Nordea is the leading Nordic custodian and
the only truly Nordic player with well-established banks in Finland, Denmark, Sweden and
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A dedicated relationship manager supported by a specialist team will always be able to offer
you a winning combination of regional competence and local insight. Our size, experience and
connections with key players make us a sustainable provider in the evolving Nordic and Baltic
securities markets.
finally gone mad? Other important but secondary elements include cost reduc-
tions, superior technology, an understanding of the industry,
flexiblity and capacity. Chemistry inevitably plays a part too.
Do the people on either side feel they can communicate with
Absolutely stark starting one another? Ask that question of staff involved at Barclaycard
bonkers mad? which recently decided to create a centre of fraud excellence in
India and you will receive an expletive-filled reply worthy of the
The news that an Indian leadership of the British National Party.
outsourcing company, that An examination of the putative partner’s key attributes is not
claims The Royal Bank of limited to the buy-side’s due diligence on the providers. Provid-
ers will cast just as critical an eye over asset managers and fund
Scotland and Goldman Sachs managers before agreeing to join hands.
amongst its clients, plans to The size and quality of an organisation have a crucial role to
employ time-serving prisoners play in making the right selection, but they are only part of the
at Cherlapally Central jail in story. More important is the psychology. It might be a bit of a
cliché but outsourcing is not based on a client-supplier relation-
Hyderabad, India, strongly ship, it’s a partnership. The client’s vision must dovetail with
suggests the answer is yes. the supplier’s vision. If the client sees the supplier purely as a
vendor, it’s not going to work.
Client and supplier need a common platform, and to agree
This unique public private experiment, as it was described in on tax structure and location. The longer the mating dance,
The Times newspaper of May 13 this year, will see around 250 the better; both sides get to know one another better, and learn
prisoners – both convicted and awaiting trial – employed to what the other likes and dislikes.
help process bank paperwork. They will receive training in basic The economics need to work for both sides, but corporate
tasks such as typing application form details into computers alignment, cultural alignment and shared values are also im-
before being unleashed on the job. portant. Suppliers who take a high-touch approach will not fit
In what sounds perilously close to allowing lunatics to take well with clients who want a commodity service. In the securi-
over the asylum, they will also help to process insurance claims. ties services world, the outsource supplier needs to become an
The world is familiar with the well rehearsed arguments in fa- extension of the fund manager involved.
vour of outsourcing and offshoring. The idea of using convicts The client might worry about giving up control, but the sup-
does, though, however outrageous it might at first sound, tick plier will think more in terms of extending the client’s reach
a number of boxes which could lead to it being given serious and capabilities. Clients who are unable to invest intellectually
consideration. are less likely to derive the full benefits from outsourcing.
Picking the right partner is a combination of art, science and
sheer gut instinct. Organisations which are considering out- The economics need to work for both sides, but corporate
sourcing generally look for two key attributes. alignment, cultural alignment and shared values are also im-
One, commitment to the business. Will the supplier still be portant. Suppliers who take a high-touch approach will not fit
around in five to 10 years? In this case, it will depend on the well with clients who want a commodity service. In the securi-
length of the original jail sentence. ties services world, the outsource supplier needs to become an
Picking Not all suppliers which have entered extension of the fund manager involved.
the right the market will survive; the likely
winners will be a handful of global
The client might worry about giving up control, but the sup-
plier will think more in terms of extending the client’s reach
partner is a players, though in some countries and capabilities. Clients who are unable to invest intellectually
8
ISJ48 full FINAL.indd 8 22/09/2010 14:44
Lead story Outsourcing and offshoring
Risk is a key consideration, and there is a correlation between the educated brain to proceed to the question that Radiant Info
price and risk. This is another area where the prisoner model is Systems put to The Times: Why not?
surely found wanting, given that its primary attraction seems to
be the low cost. The risk associated with handing confidential The reaction of Tony Klim, CEO (Europe, Middle East & Ameri-
financial information to convicted criminals must outweigh all ca), at Bravura Solutions, and profiled elsewhere in this issue,
possible cost considerations. Fund managers make their living was thought-provoking. “If it’s providing a useful contribution
by being innovative, and suppliers need to provide a viable serv- and prisoners are not being exploited, and they are willing to
ice. The back office needs to work, and to be totally trustworthy. do it, why not indeed? It could even help them become rehabili-
If ever there were a transitional element to outsourcing that will tated,” he commented. The suspicion is that where one provider
keep a fund manager awake at night, then surely this is it. follows, opening up a new pool of even cheaper labour, others
In a normal outsourcing contract, cost reductions have to be will follow in the race to cut costs to the lowest possible level.
paid for, and the client will want to extract value from day one,
whether in the form of a cheque or a promise on fixed costs.
This will normally have an impact on people, who need to know
whether they will be out on the street or have good long-term
prospects with the new provider. In this case, cue general ironic
laughter; releasing proven workers, even on the completion of
their sentence, will surely quickly become anathema to all con-
cerned, except the prisoners. Might we see the emergence of
imaginative new ways to extend the professional life of experi-
enced, hard-working prisoners? Or perhaps they could become
genuine full-time employees with career prospects?
In Conversation with...
The news could provide another tool in the argument against Etienne
outsourcing and offshoring. “Someone is bound to react to the
notion that you could employ time-serving prisoners,” com- Carmon,
mented one market player. “If you’re already anti-offshoring,
that kind of suggestion is bound to confirm your opinion of it
head of
as a practice. ” international
And many of us remain deeply sceptical about outsourcing and
product
offshoring, even as the cheerleaders reach a frenzy in their cel- development
ebrations of it. As observed in our separate story about the won-
derful life of BT Radianz, BT says that it continues to innovate, at
enhance and invest in its financial services portfolio. BT Radi- CACEIS Bank
anz is just one part of a specialist suite of products dedicated to
the financial services sector to address their communications- Luxembourg.
related requirements. From wholesale through to corporate
and retail banking, financial markets and payments sectors, BT “In addition SJ: What is your reaction
to the news that an Indian
boasts that it helps to increase operational efficiency, agility and
customer service. It enables the largest, secure networked finan- to the more outsource services provider is
proposing to recruit time-
cial community in the world to carry out its business reliably
and fast, using integrated voice, data and video to communicate
specialised serving prisoners to handle
within and between thousands of institutions and providers activities some of its workload?
around the world.
explained above, Etienne Carmon: This is
BT La-La Land business sections not the first time a prison
population has been given
What BT claims is indeed impressive, if it is all true. But permit that are most the opportunity to work - in
the States, there are many
those of us who live in the real world rather than BT La-La Land
to disagree. Try telling that story to anyone who has had experi-
often outsourced instances of prisons manufac-
ence of telephoning a BT help line which is obviously located on are administrative turing goods. However, this
is the first time I have heard
the sub-continent to book an appointment for an engineer to
come and investigate why their phone line makes them sound
tasks, IT of prisoners being involved in
as if they are making a call while going over Niagara Falls in a processing and the services sector.
Broadly speaking, the services
barrel equipped with crackle magnification and echo enhance-
ment machinery. development and sector requires skilled labour,
call centres. “ whereas many manufactur-
ing positions can be filled by
The day-to-day functioning customer helplines is a searing
the unskilled workers readily
indictment of the principle and practice of outsourcing, and
found in prison populations.
a 100% convincing argument against it. The regular, violent
loss of temper by UK-based customers faced with explaining
problems to telephone operators who cannot speak English,
ISJ: Do you think the idea is so outlandish that it shouldn’t be
whatever their paper qualifications might claim, must surely be
given the dignity of a reaction?
causing grave long-term damage to traditional links between
the sub-continent and Britain. As must the practice of requiring
Etienne Carmon: Not at all. But there is an ethical element to
Indian employees to watch the drab, dreary and horrendously
this question. If the workers are free to chose whether they wish
tedious EastEnders soap opera, and Match of the Day, the BBC’s
to work, are of working age and work in suitable conditions,
flagship association football programme, so they can under-
then there is no ethical issue.
stand British life more fully. And encouraging Indian workers
Furthermore, they have the opportunity to learn a new skill
to adopt English-sounding names is surely the most patronising
which could help them once their sentence comes to an end, and
element of this peculiar form of neo-colonialism. On reflection,
may even earn money that could help compensate the victims of
life in jail is very possibly the ideal preparation for working in
their crimes. Therefore, if these ethical aspects are well managed
an Indian call centre. Maybe the world hasn’t finally gone alto-
by the prison and strongly controlled by authorities, I don’t see
gether mad after all. Do feel free to write to ISJ expressing your
major problem in theory.
own point of view, for or against the motion.
10
ISJ48 full FINAL.indd 10 23/09/2010 13:22
Lead story How the world finally gone mad?
Etienne Carmon: To date, there have been few examples of Clearly, outsourcing can have its drawbacks too.Financial
successful offshoring operations when the goal is cost cutting. Services companies are also putting operational risk and to an
The additional risk factor of utilising a prison workforce for extent, reputation risk in the hands of a third party, so thorough
activities where quality is paramount seems unrealistic, espe- due diligence is critical. In terms of IT, there have been cases of
cially following the recent financial turmoil. For these reasons, production errors occurring, which have been rapidly resolved,
I doubt a financial company would seek to cut costs and be however information on the problem and the solution has not
willing to accept the additional risk associated with an incarcer- been forthcoming, leaving the “outsourcee” in the dark as to the
ated workforce. issue.
Another problem companies face concerns protection of intel-
ISJ: On a broader note, where might the suggestion sit in the lectual property rights and industrial espionage.
broader context of outsourc- By outsourcing, you are effectively handing over your business
“CACEIS has ing and offshoring? processes, know-how and information to another company.
outsourced Etienne Carmon: Finan- Despite the presence of client confidentiality contracts, there is
few parts of cial services activities often a risk that an unscrupulous person could exploit the informa-
12
ISJ48 full FINAL.indd 12 23/09/2010 13:21
FAX_Fullw_ISJ_081309.qxd 8/13/09 3:06 PM Page 1
brokers after the crisis while 20% decreased to reduce costs and
complexity of collateral management.
Finally, regulators are extremely focused on reforming our
industry. A number of proposals are being contemplated across
the US and Europe that undoubtly change our industry. Some
of these proposals include: banning naked shorts, spinning out
proprietary trading desks from investment banks, as well as
spinning out the swaps business from investment banks. Any of
these three proposals would result in a profound change in our
industry.
What should we expect next? These trends are rapidly and
dramatically changing the operating model of the industry. The
The Future Given the crisis has unleashed forces that are irreversible. In the years
to come it will be seen as the catalyst that led to a complete
financial crisis of
of Prime 2008, the hedge
overhaul to the structure of the industry and the introduction
of standardisation and co-operation. Each participant has been
impacted in profound ways and must now meet new require-
Brokerage fund industry is ments that cannot be effectively addressed by the status quo:
by Sameer Shalaby
rapidly changing
to cope with a We are also witnessing the emergence of the mini-prime broker
new world. model – one where a broker dealer acts as an aggregator of small
hedge funds to clear with larger prime brokers. On the fund ad-
The entire industry is reacting to a variety of pressures from in- ministration side, we are seeing the death of self-administration
vestors and regulators which will eventually result in previously in the US hedge fund markets – one where hedge funds rely on
anticipated institutionalisation in the form of regulation, and their internal processes and infrastructure to report net asset
standardisation in technology and infrastructure. The indus- valuations (NAVs) to their onshore funds investors.
try has not evolved to support these new demands, and hedge
funds, prime brokers, fund administrators, technology vendors On the technology front, we are seeing a rapid move towards
and service providers now have to anticipate and engineer new simplification of the hedge fund infrastructure to cut costs. This
service models. has come in two main forms—more reliance on third-party
technology vendors, especially those with hosted ASP platforms,
The industry began to claw its way back to the previous levels in as well as expectations that service providers will ramp up their
the past couple of months. Assets under management (AUM) services to include more bundled technology platforms that
in hedge funds managed from North America rose above $1 provide integrated and comprehensive front-to-back office
trillion in April 2010 for the first time in 18 months, accord- coverage, while ensuring multi-prime broker support.
ing to Eurekahedge. At the end of April, global AUM stood at
$1.53 trillion, also up 0.6% since the end of March 2010. Other Investors
regions saw marginal net inflows in April. European managers
gained $500m and Asian (excluding Japan) managers gained Investors are no longer satisfied with solely understanding
$100m. performance, but also now require a deep understanding of
business risk. As a result, over the last several months, they have
Still, increases in asset flows no longer means a return to the dramatically expanded their due diligence process to cover all
previous operational status quo. The crisis has already fast- aspects of a hedge fund’s operations and relationships. Accord-
tracked the trend for multi-prime brokering that Paladyne ing to a recent study by Albourne Partners, the average due
Systems predicted several years ago. The collapse of Lehman diligence process has now grown to over six months. Some of
heralded the death of the single-prime broker model – one the key areas covered in this due diligence include counterparty
where hedge funds rely on just one prime broker to service their risk, third-party fund administration, and operational/technol-
needs. Now the vast majority of hedge funds (large, small or ogy processes.
start-ups) have multiple prime broker relationships. Additionally, investors are now expecting other hedge fund
investment vehicles for their investments. This is mainly com-
On average a global hedge fund now uses three prime brokers, prised of managed accounts (which is more common in the
a number Paladyne expected would become the industry norm US), and UCITS (which is more common in Europe). We expect
in 2007 when large funds worked with as many as a dozen and this trend to continue, although not at the initial pace as previ-
some utilised only a single prime. Others in the industry hold ously predicted by industry experts.
the same view, according to a Celent report “Hedge Funds in
Europe –Riders in the Storm” released in May 2010 [see separate Hedge Funds
article], a third of hedge funds increased the number of prime
14
ISJ48 full FINAL.indd 14 22/09/2010 14:44
Under the microscope The Future of Prime Brokerage
Hedge funds are facing unprecedented pressure to invest in a ment banks, hedge funds, and possibly fund administrators—
considerable amount of resources explaining and reporting from transparency and reporting, to trading and shorting, to
both their performance and their business risk to all types of pricing and valuations. We are likely to witness the beginning of
interested external parties (including investors, prime brokers, significant regulatory reform that will continue for several years
administrators, auditors, regulators, and others). This reporting to come.
is further complicated by the need to aggregate their activi-
ties across multiple prime brokers. We expect the relationship Fund Administrators
between hedge fund managers and these external parties to be
much more formalised, with significant due diligence up front, The financial crisis has had a significant impact on fund admin-
and high expectations for ongoing transparency and reporting. istrators. Given the reduction in total assets under management,
most fund administrators have lost huge assets, in some cases,
Prime Brokers 50% of their AUA (assets under administration). This trend
has put significant pressure on fund administrators to revisit
The crisis instantly dispelled any lingering doubt that the multi- their business models and their commitment to the space. For
prime model was not the way of the future. Overnight, hedge some, this created an opportunity to build their service offering
funds sought to mitigate counterparty risk by moving their to support the wave of new mandates offered in the US alone.
assets across multiple counterparties. Prime brokers that could Given the pressure from investors to use independent fund
provide the adequate services and reduced risk, along with a administrators, self-administered hedge funds have looked to
multi-prime solution, were clear immediate winners. One of administrators for their help. We expect this trend to continue
the winners in this race was Credit Suisse which was the first well into 2010.
prime broker to introduce multi-prime technology through its
Advanced Prime partnership. Primes that lack this multi-prime Fund administrators have looked to opportunities to offer full-
infrastructure now face the costly prospect of retooling their service support to small-to-medium sized hedge funds. Many
mostly single prime technology, to the new multi-prime stand- administrators have been expanding their offering to include
ard. This comes at precisely the same time as there is wide- middle-office support, in addition to their back-office and
spread pressure for primes to reduce their high-cost structure as traditional NAV services. Finally, many administrators have ex-
well as strengthen their balance sheets. panded their offering to include a technology platform that can
support trade capture, real-time P&L, as well as multi-prime
In addition, primes have been eavaluating and will continue to reporting.
evaluate their current hedge fund clients to terminate unprofit-
able relationships. This will continue into the future with a clear New Requirements
focus on profitable clients that have the proper pedigree as well Prime Broker Roadmap – Five Steps for Success
as strong operational controls to minimise risks.
In order for prime brokers to be successful and capture more
Another unsettling issue for many primes is their inability to assets in a multi-prime world, we expect them to adapt their
understand the complete aggregated leverage of their hedge offering by expanding it to include other services, in addition to
fund clients. This lack of transparency into the activities of their traditional core services. We have identified five necessary
their clients was a major contributor to the misgivings many requirements – essentially a roadmap to success:
had about the solvency of the investment banks at the height of
the crisis. Number One: Broker-Neutral Technology
15
ISJ48 full FINAL.indd 15 22/09/2010 14:44
US focus Corporate Actions
Credit Suisse has recognised this need before any other prime Number Four: Fund Administration and Independent Net
broker and was a pioneer in providing such solution. It formed Asset Valuation
EX
a groundbreaking alliance with Paladyne Systems in June 2006
to offer a fully-hosted, front-to-back office multi-prime tech- The fourth requirement of our roadmap is to provide fund
T
nology platform. Industry analysts initially thought this would administration and independent net asset valuation. More and
make Credit Suisse’s clients less ‘sticky’. However, the strategy more investment banks have been building this capability as an
was clearly justified after the death of the single prime model in additional source of hedge fund revenue. Fund administration
2008. needs to be run independently from the bank’s prime brokerage
side to safeguard a fund’s privacy. As an alternative to perform-
Following this partnership, Citigroup teamed up with Linedata ing this function internally, banks can avoid potential conflicts
to include Beauchamp as part of its Open Prime offering, but it of interest and privacy pitfalls by establishing a strategic rela-
did not offer a hosted ASP solution. In September 2009, Sophis tionship with a third-party fund administrator.
joined forces with J.P. Morgan’s Prime Brokerage business and
introduce iSophis, a reporting solution that allows hedge funds Number Five: Independent Business Consulting Services
to comprehensively manage their risk and portfolios across
multiple prime brokers. (Given the recent news about the im- As a final component, prime brokerages will need to further
minent sale of Sophis, this offering may be in jeopardy.) enhance their independent business consulting practices.
Most primes already consult with their clients in areas such as
Number Two: Independently Hosted Technology staffing, office space, technology systems, vendor selection and
service providers. However, these internal consulting groups are
A critical component of the independent technology offering is very expensive and must remain current in many areas. Keeping
the delivery model, which must be provided by an independent in-house staff abreast of the latest trends, software, IT upgrades,
third party and offered as a full service Application Service Pro- among other things, in a fast-moving industry, can prove chal-
vider, or ASP model. The third-party delivery ensures privacy
of positions and trading strategies, which is a key concern for
lenging for banks. T
hedge funds. Any multi-prime technology that is not delivered
via an outside, independent vendor is less desirable because
As a more likely scenario, a prime would maintain a core team
in-house to provide such services, in addition to establishing
T
it potentially could offer a prime a complete view of a fund’s one or two strategic consulting partnerships to complement
activities across all of their prime relationships. In addition, a their offering and perhaps include as a white-labeled service to
technology solution provided within the bank will be difficult their customers. This model is not only more cost-effective. It
to modify and interface with other prime broker technology also ensures the objectivity of their business recommendations.
Sameer Shalaby is chief executive officer of Paladyne Systems
platforms, as well as be another concern in any single-prime
counterparty relationship. An independently hosted technology requirement. Squeezing the definition of what constitutes a day F
solution (even if funded by any prime broker) still offers hedge will put further pressure on moving off T+3. If we stay in T+3,
do we get any benefit from an earlier affirmation? Another way
funds the freedom to maintain an independent relationship
with the same vendor, even if they no longer have a relationship of looking at that is if we do same day affirmation, does it mat- w
with such prime. ter if we stick to T+3.”
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A Director and 40-50%, by improving insulation and replacing two boilers with
Go Green, Make Trustee of the super-efficient zoned central heating, and totally renewing all
Money! Clerkenwell, Lon-
don-based Car-
lighting. Insulating buildings enjoys a very rapid payback of the
original investment, he reminds us. This writer’s own personal
Go green, and make bon Disclosure experience bears that out. After taking advantage last autumn
yourself some money. Project (CDP),
which claims that
of a subsidised cavity wall insultation scheme at a total cost of
less than £250 for a house with around 1650 square feet of floor
That is the advice of since its forma- space, energy bills have already dropped by more than £50 a
tion in 2000 it month. On that figure alone, payback took about five months.
Alan Brown, Chief has become the
Investment Officer at gold standard for
carbon disclosure
Alan is also devoted to his work for the CDP, an entirely vol-
untary project whose objective is to persuade companies to dis-
Schroder Investments. methodology close details of their carbon footprints. The CDP boasts names
Not only will you be and process, Alan
Brown is the kind
such as former US President Bill Clinton, former UK Prime
Minister Tony Blair, and the current German Chancellor Angela
making a contribution of optmist whose Merkel on its roster. It has grown year-on-year both in terms of
18
ISJ48 full FINAL.indd 18 22/09/2010 14:44
The ISJ Profile Alan Brown
to reduce carbon dependency), or adaptation to (changes to investment case. Having established the investment universe,
adapt to the consequences of), the effects of climate change on a the team is focused on the very best ideas that have been identi-
globally diversified basis. Simon Webber and Matthew Frank- fied by Schroders global equity team and locally based equity
lin (Joint Fund Managers) are supported by a team of climate portfolio managers and sector specialists.
change specialists, global sector specialists as well as Schroders’ Robin Stoakley, Managing Director UK Retail said: “We believe
wider global network of 80 experienced large and small cap there are excellent returns available by investing in companies
analysts. which will benefit from efforts to mitigate and adapt to climate
change. Dealing with climate change is likely to be the biggest
Climate change Simon Webber commented at launch: global investment theme of the next 20 years plus.
launch “Investors simply can’t afford to ignore
the realities of climate change. Across all “The rapidly changing landscape will enable innovative, flexible
sectors, climate change will have a broad and lasting impact and well run companies to improve their prospects relative to
along the value chain. For the mainstream equity investor, now competitors, leading to strong investment returns. We believe
is the time to adopt a global approach to what will be a major an unconstrained portfolio dedicated to investing in these
investment theme for the foreseeable future. Crucially, Schrod- well positioned companies has the potential to generate very
ers has the capability to strong investment returns. This is not just about a few wind
“Investors simply take a global approach farms.”By mid-2009 it had begun to experience institutional
can’t afford to to a global challenge –
enabling us to identify
take-up and Schroders was entrusted with $200m by an institu-
tion (WHICH ONE?) to invest in accordance with the fund’s
ignore the realities the broadest possible strategy.
of climate change. opportunity set.”
Investment The fund’s investment objective is to
Across all sectors, Before launching the Objective and
Policy
provide capital growth primarily through
fund, Schroders estab- investment in equities and securities of
climate change will lished a proprietary data- worldwide issuers which will benefit from efforts to accommo-
have a broad and base of companies where
the effects of climate
date or limit the impact of global climate change. Investment
will be primarily in directly held transferable securities. The
lasting impact along change have a significant fund may also invest in collective investment schemes, cash,
the value chain." impact on the long-term deposits, derivatives, warrants and money market instruments.
Risk Profile
GBP
with –1.0% for its benchmark index, the MCSI (World( NDR
20
ISJ48 full FINAL.indd 20 23/09/2010 13:22
CRAFTING THE vision FOR THE securities industry
On AIFMD, UCITS:
The view from Custom House
Dermot Butler: Therefore, in order to be able to market a fund
to EU member state resident investors, a non-EU
“It appears that regulated manager will probably have to set up an
22
ISJ48 full FINAL.indd 22 22/09/2010 14:44
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think it is likely they do know what they are doing and one of as I understand it, a fund cannot sell short of a motor index in
their objectives is to find out where everybody’s money is and to order to hedge a long position in pharma stocks.
control it. It is not a measured reaction to anything and it may
well be a knee-jerk reaction and will turn out badly. It can be seen that the now common or garden merger arbi-
trage, convertible arbitrage and even long-short equity funds
The likelihood is that both of these regulations are likely to will have to modify their strategies in order to meet UCITS reg-
lead many non-EU managers deciding to ignore the EU market ulations. Some will never be able to do so. On the other hand
and that will lead to an increase in isolationism because I think a professional investor, long-short hedge fund, can be more
many European managers will have the same reaction to the precise about what it wishes to short and therefore presumably
recently introduced US regulations. generate greater profits or smaller losses.
The benefit of setting up in the EU as a manager or UCITS are more expensive to establish than a professional investor
fund fund and have higher operating costs. This is because:
Obviously the main benefit of setting up in the EU, whether Legal costs in terms of UCITS funds are very much higher than
setting up either a manager and/or their fund in the EU, is that they are for what are almost ‘boiler plate’ professional investor
their fund will be able to be marketed to EU residents. I think funds. Those establishment costs have to be written off in the
it is likely that, if a manager wishes to go through the hassle in first year of operation unless the auditors are reasonably flexible;
order to market to EU investors, they will have to establish a Annual operating costs are higher because you have to have a
manager in an EU jurisdiction on the understanding that that custodian and the reporting and supervision requirements for
manager will have to comply with the EU regulations which we UCITS are very much more onerous and penalties for error are
have already discussed. On that basis they will also be able to very much higher for UCITS funds. Director fees are higher,
set up the fund in the same or another EU jurisdiction and will audit fees tend to be higher, and there is almost certain to be
then be able to market their fund in the EU, to EU Investors. some ongoing legal work with lawyers attending every quar-
terly board meeting and very often having to update or amend
UCITS documentation.
UCITS were originally introduced in 1985 as a counterpart to Investment manager fees don’t come into the picture, as they
the US mutual fund and is a product that could be marketed are the same for both types of funds. I don’t think that non-
to retail investors in Europe. Although it has gone through UCITS funds are charging too little – just that the structure of
several changes, UCITS have always had restrictions regarding UCITS funds makes it more expensive. It is correct that most
investments and quite strong regulation to protect investors. UCITS funds, which are generally mutual funds, have more
Although some of those restrictions have been eased, never- than $1m NAV (net asset valuation), but that is not the case
theless there are only very few hedge fund strategies that can with hedge funds anymore.
utilise UCITS without substantial amendment to their normal
strategy. Selling short for any reason other than hedging is very To go back to my previous comment, the perceived
difficult but this has been achieved by introducing derivatives benefits of UCITS funds are:
including swaps.
Greater distribution and a way of attacking the retail market.
It seems to be that the current popularity of UCITS This is true, providing you have the distribution. Most hedge
is based on three perceptions: fund houses do not have the distribution and have to rely on
third parties. Hedge fund strategies are much more difficult
They will automatically give access to the European market; to explain and many long only funds – mutual fund/unit trust
They are strongly regulated and therefore “safer”; marketers - do not wish to fall foul of the best advice regulations
They will not be subject to the restrictions under the AIFM in terms of marketing a hedge fund UCITS to retail clientele.
Directive, however the manager will in all likelihood have to
comply with the restrictions, that have been discussed above, UCITS are more expensive to establish than a professional investor
with regard to complying with AIFM requirements. fund and have higher operating costs. This is because:
The drawback with regard to UCITS and hedge funds strategies 1. Investors may think that because a UCITS fund has higher
as I understand it, is that it is still not possible to have naked regulation, it needs less due diligence. Good regulation does
shorts within a UCITS strategy, although short positions can be not prevent the appointment of an incompetent investment
established in indices or similar vehicles if they can be shown to manager.
be hedging the portfolio or specific parts of the portfolio. Thus,
it would be possible to hedge by going short of an index or ETF 2. It seems to be forgotten that there were at least two and
providing the fund was long of securities that comprise, in part, possibly four UCITS funds in Ireland and Luxembourg that
the index or ETF in question. Similarly presumably the fund were invested in Madoff. Therefore the UCITS structure has
could sell short of stock-specific futures contracts. However, not, to date, prevented a crook taking money out of the UCITS
24
ISJ48 full FINAL.indd 24 22/09/2010 14:44
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If the manager funds; form of distribution arrangement. The problem, that I have
already alluded to, with hedge fund and CTA strategies, is that
does not fall in 3. The UCITS fund avoids they are more complex and therefore more difficult to explain
under any of the AIFM Directive. This is
true as far as the fund goes,
to the average ‘retail investor’, who is likely to be influenced by
somewhat biased tabloid and broadsheet press, but that is a
these options but it does not reduce the whole other subject. It is my understanding that several UCITS
burden that has to be borne – i.e. many more than can be counted on one hand - have been
then, to make by the investment manager formed, but I’m sure only a very few have raised any meaningful
the UCITS – it is after all the Alternative
Fund Investment Manage-
money. That is probably because they fall under one of the three
examples above.
successful he will ment Directive.
need to establish If the manager has qualified
You ask if we are going to see more fraud and theft. I am not
sure that I see the connection between fraud and theft and an
some form of distribution arrangements, institution that wishes to invest in a particular strategy but
distribution then it may be worth setting
up a UCITS.
is restricted from investing in anything but a UCITS vehicle.
Having said that, it must be realised, that in any situation where
arrangement. Some of the big hedge fund large sums of money are circulating, whether it is in the hedge
managers have been able to fund Industry or anything else, that fraud and theft are likely to
seed their UCITS by way of a transfer of subscriptions from be seen. Prohibition is the perfect example.
their existing offshore funds into their UCITS fund. Others
have very effective distribution networks such as MAN’S AHL I have never believed that regulation per se stops the dedicated
FUND, and Winton, and I have no doubt that if they establish crook. It may stop or hinder the opportunistic thief, but the
UCITS they will be able to get investors interested and meet dedicated crook will carry on regardless. I agree that without
their $100m level quota in a relatively short time. trust the Western economy is doomed but I don’t think that it
It may be that a manager is in contact with a European institu- is doomed just because of some high-flying crooks. To put it
tion, or for that matter an Asian institution, which is mandated another way, you may only want to buy a house that has got a
to restric investments into hedge funds by way of UCITS. They good alarm system, but we all know that won’t prevent a clever
come across an investment manager whose strategy they like burglar, especially if you happen to be away from home. The
and are prepared to invest $100m but require a UCITS. It fact that you may be the victim of a clever burglar does not
would be a very arrogant manager who didn’t go through the mean that you do not buy a house and choose to live in the park
process of establishing their own UCITS to meet the require- instead.
ments of those investors.
My comments, specifically regarding Madoff, are not that
If the manager does not fall in under any of these options then, UCITS regulation is imperfect because Madoff existed. What
to make the UCITS successful he will need to establish some was imperfect about the UCITS regulations was that several
UCITS funds were able to
invest money with Madoff,
either because the managers
were careless or because the
mangers did not follow the
investment restrictions that
were imposed on their funds.
Madoff never had a fund.
The error in this case appears
in regard to the managers
of the UCITS funds failing
to do their due diligence
on Madoff. The problem
with Madoff was that it was
a huge sum of money that
itself was dwarfed by the sub-
prime collapse. If you read
“The Big Short” by Michael
Lewis, then one is inclined
to think that the sub-prime
mortgage market was run by
bigger and better crooks than
Madoff ever was.
26
ISJ48 full FINAL.indd 26 22/09/2010 14:48
Technology Managers Lag Behind Technology
Paris (11.61%), in third place The top five execution venues for equities during Q2 2010 as
BATS Europe (11.22%), in fourth processed by Xtrakter were as follows: in first place was Chi-X
Europe (27.79%), in second place was NYSE Euronext - Paris
place Turquoise with (6.39%) and (11.61%), in third place BATS Europe (11.22%), in fourth place
Turquoise with (6.39%) and in fifth place the London Stock
in fifth place the London Stock Exchange (6.21%).
Exchange (6.21%). Xtrakter noted when reviewing the combined venues of execu-
tions that the NYSE Euronext group of companies captured
17.87% of the total equities share. OTC execution represented
The onward march of the 9.34% of all equity trades conducted by Xtrakter clients during
this period. A detailed breakdown of the top 10 venues and
multilateral trading venues their percentiles is listed on
continues, while opinions abound Xtrakter.com.
on which will be next to throw When comparing the percentiles for the first and second quar-
in the towel as the inevitability of ters of 2010 relating to equity trading the following was noted:
The London Stock Exchange lost 4.54% of its share; Chi-X
consolidation in an oversupplied dropped by 2.30% & NYSE Euronext – Paris rose by 2.66% of
the total amount of equity transactions processed by Xtrakter.
market begins to bite. Recently
Tradeweb Europe was ranked No.1 In 2009, Xtrakter calculates that it processed 578m transactions
on behalf of its user community. It adds that its league tables are
for fixed income trading and Chi-X based on the number of transactions processed by Xtrakter and
was ranked No.1 for equities not by their nominal value.
The tables do not include data relating to systematic internal-
trading, according to clients of isers or general data for trades conducted on the LSE stock
services and data to the capital The consolidation of MTFs is more or less inevitable, according
to seasoned industry observers, following the pattern of behav-
markets. iour already experienced in the USA. “At the last MTF mini-
census, CESR (Committee of European Securities Regulators)
The most recent edition of its liquidity-tracking tables for the counted 137 of them active in Europe, compared with 85 in No-
second quarter show that the top five execution venues for fixed vember 2007, 100 in March 2008, 122 in February 2009 and 130
income were as follows: Tradeweb Europe (3.8% of the total in December 2009”, observes Dr Anthony Kirby, Chair of the
fixed income transactions processed by Xtrakter during this ISITC-Europe Regulations Unit. “It is debateable whether 80%
period); Bloomberg Tradebook (2.12%); MTS S.P.A (1.14%); of those names carry consistently significant levels of liquidity,
ICAP Electronic Broking (1.00%); Bondvision (0.73%). he adds, because many exist only for registration purposes”.
Xtrakter noted that when reviewing the combined venues of While the number of MTFs in Europe has grown by 61% in lit-
execution data that the MTS group captured 1.77% of total tle over two and a half years, the benefits brought to the market
fixed income activity. OTC remains the preferred method for
27
ISJ48 full FINAL.indd 27 22/09/2010 14:48
Technology Managers Lag Behind Technology
from greater levels of choice and functionality are clear. The regulation. And remember, an MTF has to build enormous scale
effect of regulation has been to encourage more competition to be profitable. They don’t have a listing business and the other
between trading venues and the development of new business revenue streams that the traditional exchanges enjoy. And they
models. Without MiFID, the European directive that did so are dependent on price formation on the lit markets provided
much to promote the proliferation of MTFs, there would have by exchanges”.
been less high frequency and algorithm-based trading. Whether
or not that is a positive is a subject for a different story in anoth- “Looking ahead, the quality and solidity of clearing relation-
er issue. In ISJ issue 49, we plan to examine the dangers involved ships could well prove to be the deciding factor.” So much so, in
if the technology in the front office moves too much out of line fact, that he predicts that clearing, one of the many Cinderel-
with technology in the middle and back office. “Looking ahead, las of the industry, will
finally get to go to the
The common claim, though, that investors have benefitted from the quality and ball, as a G20-level issue.
lower costs is the subject of some dispute. Automation has in-
deed cut headline costs, comments Dr Kirby, but the total costs
solidity of clearing “From a regulatory and
prudential point of view,
of trading – including the implicit costs which are not often relationships could clearing is the next big
visible to the end investor - are broadly similar to 2003. “Spreads thing, with upstream
and commissions are coming down, but market impact and well prove to be the transparency fulfilling
opportunity costs have ramped up over the last two years. And
if you include post-trade costs, which are often priced per trans-
deciding factor.” a similar role from a
business point of view,”
action, then these are actually going up given the trend towards he concludes. “What gets
smaller trade sizes in Europe, following the US pattern over the cleared and at what price point will occupy business as well as
last decade”. operational minds over the next three to five years”.
On balance, he believes that MTFs have proved to be an inter- Only 32% of risk managers feel business executives are up to
esting model for all assets classes, particularly for derivatives. date on technology. That is one of the key findings of a recent
“Who knows where it is going to go when it comes to cross- Global Association of Risk Professionals study by Sybase: Risk
asset class trading?” he comments. “It depends on the pace of Management Systems in the Aftermath of the Financial Crisis.
innovation, the provision of real-time systems and on beneficial The survey commissioned by Sybase was sent to more than
28
ISJ48 full FINAL.indd 28 22/09/2010 14:48
Technology Managers Lag Behind Technology
29
ISJ48 full FINAL.indd 29 22/09/2010 14:48
ISJ Analyse this: Corporate actions
be underestimated pace with business and The adoption of existing market standards to correctly report
in terms of industry requirements,
creating system scalability
positions out on loan along with other positions types would
also help the flow of information. The problem is that static
business potential and risk issues for the data in corporate actions legacy systems often can’t support the
industry. Yet the securi- maintenance of trade agreements at relationship- or deal-level.
and enormous ties lending and borrow- Digitising the agreements between participants would cater
opportunities it ing business cannot be
underestimated in terms
for all downstream processing, simplifying the manufacture of
corporate action benefits and taking care of tax regimes.
presents. of business potential and Getting the right operational and technology infrastructure in
enormous opportunities place is going to be key to controlling cost, managing risk, and
it presents. supporting new and existing regulation as the industry contin-
From an operational and technology standpoint, these solu- ues to grow. The solution lies in identifying processes - such as
tions have historically focused on either using upgraded legacy claim identification, attribution and calculation (including tax)
or highly manual systems. The over-the-counter nature of the - which can be automated to remove unnecessary breaks which
business, where each deal has individual nuances, is already require manual intervention. Custodians are then able to build
straining these systems; lending analysts spend a high percent- claim instruction mechanisms which are sophisticated and
age of their day just looking for the data needed for servicing flexible enough to be automatically generated on pre-configured
loaned assets instead of providing value-added services to days, and can focus their attention on offering innovative
clients. products and services.
30
ISJ48 full FINAL.indd 30 22/09/2010 14:48
Spotlight on: Safekeeping founds
31
ISJ48 full FINAL.indd 31 22/09/2010 14:48
Spotlight on: Partnership and alliances
32
ISJ48 full FINAL.indd 32 22/09/2010 14:48
Spotlight on: Partnership and alliances
“Our commercial partnership with U.S. Bancorp Fund The GSSA commercial alliance between USBFS and SGSS
Services provides investment managers with the financial combines both companies’ service models to offer global
strength of both organisations,” said Alain Closier, global administration, shareholder servicing, distribution support,
head of Societe Generale Securities Services. “It allows capital introduction support, product development, securi-
clients to access industry leading technology, key adminis- ties lending, trustee services, credit facilities, and middle of-
tration services, and the tools necessary to be successful fice solutions. Investment managers seeking a single source
in the global investing market. Clients benefit from premier for servicing global products are able to receive 24-hour glo-
transatlantic services that are not necessarily available today bal support. Each of the two organisations brings significant
through one single organisation.” industry tenure and best-in-class reputations within their
respective local markets.Compelling interest
In simple terms What he means in simple terms is that “The growing interest in global distribution is quite compel-
previously SGSS had to shrug its col- ling,” said Joe Redwine, president of USBFS, in a quote
lective shoulders dolefully and say no tucked away towards the end of the official announcement.
when asked if it could provide clients “We are pleased to offer this innovative commercial alli-
in its home region, Europe, Middle ance with SGSS, one of the leading European investment
East and Africa, if it could service their management services providers [one suspects that these
needs in the USA. SGSSs’ coverage words originated from the Tour SGAM SGSS WHQ in Paris
of the USA was somewhere around rather than with Mr Redwine, but shame on us for being so
approximately zero. Now it can smile cynical; that’s the corrosive effect of more than a quarter-
broadly and say to those clients, at the century on the front line of international financial journalism].
risk of breaching President Obama’s “Their European expertise and presence, both in the product
copyright on the phrase: “Yes, we can!” offerings and in the countries where they are distributed, will
The reverse is true for USBFS, which provide our clients with strong regulatory support, distribu-
can now offer the growing number of tion services, and global access to investor market trends
US-based clients who are looking for a across Europe.”
way into EMEA that previously did not
exist. For those who might not already know, Societe Generale is
fond of telling the world that is one of the largest financial
“One approach to the problem that we had previously was services groups in the euro-zone. It is one of the largest
to identify an institution in the US that has strong relation- banks in the euro-zone in terms of assets under custody
ships with US fund managers but little or no infrastructure in (€3,246bn, March 2010) and under management (€164bn
EMEA,” observes Sebastien Danloy, global head of sales at excluding Amundi, March 2010). Established in 28 locations
SGSS. “USB might not be a well known name in EMEA but worldwide with more than 4,000 employees, SGSS provides
it has a 20-25% market share in its home market. There are a full range of securities services that are adapted to the
750 US mutual sponsors, for example; of those, 207 are cli- latest financial markets and regulatory evolution: clearing
ents of USB. And there are around 7,000 fully active funds in services, custody and trustee services, retail custody serv-
the US; of those, 1,323 are clients of USB. The fit between ices, liquidity management, fund administration and asset
our two organisations is an excellent one. They want help in servicing, fund distribution and global issuer services. SGSS
EMEA. We want a way in to the US. Hence, the alliance.” is currently the sixth-largest worldwide global custodian and
the second-largest in Europe.
33
ISJ48 full FINAL.indd 33 22/09/2010 14:48
Spotlight on: Partnership and alliances
bank in the United agreement which Alain Closier, head of SGSS, said “This new commer-
Arab Emirates, is a capitalises on their
abilities to securi-
cial agreement is another illustration of our development
strategy to build on our strong pan-European platform and
clear indication of ties services in their
respective regions.
offer local expertise and resources to foreign players who
are increasingly interested in accessing European markets.
Societe Generale’s We can now bring additional value to our clients by offering
commitment to The commercial
agreement allows
them direct access to the leading local securities services
provider for the GCC countries.”
developing its SGSS, the world’s
sixth-largest global Commenting on the importance of the GCC countries to
presence in the custodian and the Societe Generale Eric Wormser, Societe Generale group rep-
region.” second-largest in
Europe, and NBAD,
resentative for the Gulf region said: “This commercial agree-
ment with the number one bank in the United Arab Emirates,
the first licensed is a clear indication of Societe Generale’s commitment to
securities custodian in the UAE, to expand the geographical developing its presence in the region.”
coverage of their securities services.
“Using SGSS as a preferred provider will allow us to offer
SGSS says that each business will benefit from the other’s our local clients the range of securities services available
strengths by leveraging its product expertise in order to from one of Europe’s leading Custodians,” said Hany Samir,
provide comprehensive solutions and broader global sup- the Head of NBAD Custody Services. “NBAD is a forward-
port to European- based institutions and clients in the Gulf looking bank that devotes considerable capital, care and
Co-operation Council (GCC) countries. effort to innovating the best-in-class financial products and
services for all of our clients here in the UAE and across the
“NBAD is actively and prudently expanding its services by GCC.
capitalising on its strengths and advantages,” said Rüdiger
von Wedel, the senior general manager of Global Wealth
Division of National Bank of Abu Dhabi.
34
ISJ48 full FINAL.indd 34 22/09/2010 14:48
Spotlight on: Partnership and alliances
35
ISJ48 full FINAL.indd 35 22/09/2010 14:48
The ISJ Profile Tony Klim
It somehow seems very appropriate that the chief executive He then joined System Designers, which became part of
officer (EMEA – Europe, Middle East and Africa) of Bravura EDS. “I served my apprenticeship with several big names
Solutions is a keen skier. There are, after all, direct and indi- in the 1980s, with a lot of my early work being in defence
rect analogies between being at the head of a high-growth systems,” he says. “Secure communications and command
company in testing economic times. The thrill of the growth and control systems were very hi-tech, and it became clear
can be likened to the thrill of descending rapidly down a that they could be applied to financial services, especially
steep slope with only a helmet and a bit of Lycra for protec- banking, where networks were very much needed to sup-
tion. The potential for danger should concentration slip for port card technology and payment systems.”
even a moment is self-evident.
Having hit on his niche, Klim joined a small privately held
Tony Klim (full name Anthony Brian Klim) is not only a keen start-up company, The Software Partnership. He worked
skier, he is also an eager sailor. Cue a series of obvious ref- there as a director and consultant from the mid-1980s to
erences to learning the ropes, man overboard and navigat- the mid-1990s helping to service a client list which boasted
ing awkward hazards. Strangely, though, the formal sailing most major UK and European banks. The company became
qualifications in his family belong not to him, but to his wife. a leader in direct electronic banking, he recalls, in the days
He is more of a leisure sailor on their family summer jaunts before the internet exploded into general usage. The found-
sailing in the Caribbean, and around Greece and Turkey. Mrs ers sold The Software Partnership to Deluxe Corp of the US
Klim is firmly in charge, running a tight ship. in 1994, and he stayed with Deluxe as head of international
marketing until 1998.
Just as Klim himself does in his post at Bravura Solutions,
an Australia-based provider of transfer agency services and In 1998 he accepted an invitation to join Marlborough Stir-
software to top financial institutions, and wealth manage- ling, at the time a 200-man outfit focused on new technol-
ment services. International known clients include Citigroup, ogy for the life insurance and pensions market. As director
Schroders, Invesco, J. P. Morgan Worldwide Securities of strategy, he drove the company through a period of rapid
Services, GAM and BNY Mellon. Despite being listed in growth, a combination of organic and by acquisition.
Australia, Bravura today derives around 70% of its business This took staff numbers to around 2,000 in six offices in the
36
ISJ48 full FINAL.indd 36 22/09/2010 14:48
The ISJ Profile Tony Klim
Avox Limited’s primary business is cleansing and maintain- Avox clients include major financial firms such Citi, Bar-
ing reference information on legal entities and counterpar- clays, Nomura International, Standard Bank, Mizuho,
ties needed by financial services to support a variety of Allianz, Eurex, SWIFT, Mitsubishi UFJ and Royal Bank of
operational, risk management and regulatory compliance Canada.
activities, including know your customer (KYC) and anti-
“The company asked money laundering
(AML) reporting. Avox
DTCC says it has a growing range of data management
and reference data services aimed at helping its custom-
me to carry out a provides an auto-
mated, centralised
ers around the world improve operational efficiency and
mitigate risk, including its Global Corporate Action (GCA)
strategic review of corporate data- Validation Service, which provides a centralised source of
the business. I liked base resource, with
readily accessible
scrubbed information on corporate actions, e.g., tender
offers, conversions, stock splits, dividends and nearly
it so much that I information on the
legal name, address,
100 other types of events for equities and fixed income
instruments for more than two million securities from 160
decided to join it corporate hierarchies, countries; its New Issue Information Dissemination System
in 2008, and the immediate and ulti-
mate parent, industry
(NIIDS), part of the underwriting process, provides data on
municipal bonds, equities and corporate bonds that are
business has grown sector codes, com-
pany identifiers, and
DTC-eligible to vendors, dealers and market participants;
and security data from its masterfile, which provides basic
strongly since, making regulator information information on all securities handled by DTCC’s depository.
two acquisitions in applicable to these
companies.
that time.”
“The need for accurate, well maintained reference data
on securities and legal entities is a growing priority for the
financial services industry, to help manage credit expo-
sure, meet new regulatory compliance requirements and to
improve transparency from the issuer to the end investor,”
said Kirby. “The acquisition of Avox is a natural comple-
ment and part of a global strategy DTCC has underway to
provide our customers with a full suite of value-added data
capabilities.
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US and Technology Focus DTCC ACQUIRES AVOX LTD
Express
Briefing
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US Technology Focus
40
ISJ48 full FINAL.indd 40 22/09/2010 14:48
payment history of an asset. The workflow tool assesses standards in 2009,” said Papenfuss. “In the implementation
whether an appropriate level of reliability has been achieved phase of these standards the banks, market infrastructures
by either producing a golden copy or by creating an excep- and data vendors are heavily dependent on the willingness
tional workflow item that can be reviewed by our operations of the issuer community to contribute to the success of the
specialists. This data cleansing and scrubbing functionality harmonization across multiple markets. Similar interdepend-
is used for corporate action and income event information encies have been identified in the most recent International
gathering.” Securities Services Association ISSA report on corporate
actions in June 2010 as well.”
Papenfuss said Clearstream is fully compliant and standard-
ising around ISO 15022 formats. “It should be noted that While Clearstream is actively following the development of
ISO 15022 compliance varies in each local market.” He said. the XBRL-Swift DTCC, Papenfuss said, “Based on the bilat-
“It’s exactly in this area where the co-operation with issuers eral discussions in exploring the details of the initiative, it’s
is critical and of utmost importance.” too early to transport it into other markets - Europe, for ex-
ample - as the actual delivery and implementation is pend-
Due to multiple markets and processes, standardisation in ing. Finding the right incentives and momentum to involve
Europe is more challenging than in the U.S. The European issuers in this process is key. How and when this is going
Central Securities Depository Association (ESCDA) took to happen remains to be seen.” Meanwhile, Clearstream
steps in 2004 to remove barriers to effective settlement is supporting the adoption of best market practice at the
identified by the Giovannini Group. Barrier 3 concerned the source of information, the issuance community.
harmonisation of corporate actions and pre-dates XBRL- .
DTCC S.W.I.F.T.’s corporate action initiative - even if XBRL
attempt to solve problems ESCDA didn’t’ address.
DnB NOR is the leading provider of Custody, Clearing and Remote T: +47 22 94 92 95
Member Service in Norway. DnB NOR offers a full range of securities F: +47 22 48 28 46
settlement, Corporate Action and cash management services for Contact: Bente I. Hoem,
both foreign and domestic institutional clients. The bank has a strong Head of Global Relations &
commitment to the Custody business in Norway and the staff is highly Network
knowledgeable and experienced. In addition, DnB NOR provides E: bente.hoem@dnbnor.no
a wide range of value-added services for foreign clients such as W:www.dnbnor.com
Securities Lending, Income Collection, Proxy Voting, Tax Reclaim, and
MIS reporting.
As the largest commercial bank in Norway, DnB NOR offers clients
full services in securities trading, registration, foreign exchange and
Money Market.
Banking Securities Services provides award winning local and regional For further information
custody services for investment professionals. We are proud to be the please contact
largest custodian provider in terms of assets and number of foreign Lilla Juranyi, Global Head
clients in Central & Eastern Europe. ING has been providing Securities Custody
Services in CEE since 1994 and we will continue our ongoing pursuit of at + 31 20 7979 435
excellence through new technology. Innovation and client focus are the or contact her by email:
key drivers to service our clients the best way. Lilla.Juranyi@mail.ing.nl
Other activities of ING Wholesale Banking Securities Services are
Paying Agency Services and web-based management of employee
stock option & share plans.
ING is your local partner in: Belgium, Bulgaria, Czech Republic,
Hungary, Poland, Romania, Russia, Slovak Republic and Ukraine.
Nordea is the leading financial services group in the Nordic and Baltic
region and operates through three business areas: Nordic Banking,
Private Banking and Institutional & International Banking. Nordea is the Contact:
leading custody services provider in the region. Nordea provides high Nina Groth
quality, tailor-made custody services for local and foreign investors Head of Sub-custody and
dealing with Nordic and Baltic securities. Due to the unique history of Clearing
being formed from four established banks, Nordea is the only Nordic Tel: +45 3333 6124
custody provider with strong local presence and expertise in all four E-mail: nina.groth@nordea.
markets. Nordea combines Nordic competence with local expertise, and com
has proven ability to deliver high quality services that meet both clients’
and each local market’s requirements.
• Leading Nordic custodian:
• Critical mass and resources available;
• deep local experience and active involvement in each Nordic market;
• Complete operational capabilities and best-fit systems developed in each
Nordic market;
• Proven ability to deliver high-quality service in all Nordic markets; Excellent
connection with key players in all Nordic Markets;
• Extensive product and service offering;
• Your single point of entry to the whole Nordic region.
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RBC Dexia Investor Services offers a complete range of investor
services to institutions worldwide. Our unique offshore and onshore
solutions, combined with the expertise of our 5,300 professionals in 71 Queen Victoria Street
16 markets, help clients grow their business and sustain enhanced London EC4V 4DE, UK
performance through efficiency improvements and robust risk C: Tony Johnson
management practices. T: +44 (0) 20 7653 4096
Equally owned by RBC and Dexia, the company ranks among the E: antony.johnson@rbcdexia.com
world’s top 10 global custodians with USD 2.5 trillion in client assets W: http://www.rbcdexia.com
under administration.
RBC Dexia’s innovative solutions include global custody, fund and
pension administration, shareholder services, distribution support,
securities lending and borrowing, reconciliation services, compliance
monitoring and reporting, investment analytics, and treasury services.
Sébastien Danloy
Société Générale Securities Services offers institutional investors, Global Head of Sales,
asset managers and financial intermediaries a comprehensive range Investor Services
of financial securities services: custody, clearing & trustee services, Société Générale Securities
fund administration, asset servicing and transfer agency. SGSS Services
currently ranks 3rd European custodian and 9th worldwide custodian T: +33 (0)1 41 42 98 65
(Source: Globalcustody.net) with EUR 2,580* billion in assets held E: sebastien.danloy@socgen.
and valuates 4,354* funds representing assets of EUR 405* billion (as com
of June 2007). W: www.sg-securities-services.
com
Fund Administration
Société Générale Securities Services offers institutional investors, asset Sébastien Danloy
managers and financial intermediaries a comprehensive range of Global Head of Sales
financial securities services: Clearing, Liquidity Management, Custody Société Générale Securities
and Trustee, Fund Administration, Asset Servicing, Fund Distribution Services
Services and Issuer Services. SGSS currently ranks 3rd European T: +33 (0)1 41 42 98 65
custodian and 7th worldwide E: sebastien.danloy@socgen.
custodian (Source: Globalcustody.net) with EUR 2,731* billion in assets com
held and valuates 5,158* funds representing assets of EUR 499* billion W: www.sg-securities-services.
(at end March 2008). com
Apex Fund Services Ltd is a global hedge fund administration C: Peter Hughes
solution for hedge funds and private equity clients located in 12 Group Managing Director
separate jurisdictions across the globe. The company uses the T: +1 441-292-2739
software solution, PFS PAXUS, which is a fully integrated hedge fund F:+1 441-292-1884
accounting system combined with web-based reporting to allow E: peter@apex.bm
clients and investors to access their information 24/7 securely online. John Bohan
We will tailor all solutions to meet your needs and our continuing Group Manager of Operations
focus on the quality of service and the relationship with each and T: +353 21 4633366
individual client ensures that we retain our ethos of providing a F: +353 21 4633377
personalized service rather than a generic solution. E: John@apexfunds.ie
Highly qualified and experienced staff, mirrored with top tier
technology and competitive fee structures make Apex Fund Services
Ltd the clear choice for your fund administration needs.
Custom House Global Fund Services Ltd. (“CHGFS”), the Malta Custom House Global Fund
based parent company of the Custom House Group of Companies Services Limited
(“Custom House”), was established when Equity Trust’s fund services Head Office Address:
division was merged into Custom House in September 2008. CHGFS Tigne Towers
is recognised as a fund administrator and licensed under a Category Suite 33
4 license as a Custodian for Funds of Funds and is also an authorised Tigne Street
Trustee for Trusts. Sliema 3172
Custom House offers a full 24/5, “round the world”, “round the Malta
clock” administration service out of its offices in Amsterdam, Chicago, www.customhousegroup.com
Dublin, Guernsey, Luxembourg, Malta and Singapore. This service, Contacts: Dermot S. L. Butler,
which enables Custom House to offer daily dealing NAVs covers all Chairman
aspects of day to day operations, including maintaining the fund’s dermot.butler@
books and records, carrying out the valuations, calculating the NAV customhousegroup.com
and handling all subscriptions and redemptions, as well as over- T: +353 1 878 0807
seeing payment of the fund’s expenses.
Custom House uses the PFS-PAXUS fully integrated fund Albert Cilia, Managing Director
administration system. Reporting is effected through CHARIOT, albert.cilia@
Custom House’s secure web-reporting platform for managers and mt.customhousegroup.com
investors. T: +356 2702 2799
Custom House is fully SAS70 compliant and the Dublin office was the only
hedge fund administrator in the world ever to be awarded a Moody’s Management
Quality Rating. CHGFS and its subsidiaries are fully regulated, as required, by
the relevant authorities in their jurisdiction.
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EquiLend is a leading provider of trading services for the securities www.equilend.com
finance industry. EquiLend facilitates straight-through processing by EquiLend Europe Ltd.
using a common standards-based protocol and infrastructure, which 14 Devonshire Square
automates formerly manual trading processes. Used by borrowers London, EC2M 4TE
and lenders throughout the world, the EquiLend platform allows for +44 (0) 207 426 4426
greater efficiency and enables firms to scale their business globally. T: UK- +44 (0)20 7743 9510
Using EquiLend’s complete end-to-end services, including pre-
and post-trade, reduces the risk of potential errors. The platform A: 17 State Street, 9th Floor
eliminates the need to maintain costly point-to-point connections New York, NY, 10004
while allowing firms to drive down unit costs, allowing firms to expand T: US- +1 212 901 2224
business, move into different markets, increase trading volumes, all C: Michelle Lindenberger
without additional spend. This makes the EquiLend platform a cost- E: michelle.lindenberger
efficient choice for all institutions, regardless of size. @equilend.com
W: www.equilend.com
eSecLending is a leading global securities lending agent servicing
sophisticated institutional investors worldwide. The company’s Contact:
approach has introduced investment management practices to the Christopher Jaynes, Co-CEO
securities lending industry, offering beneficial owners an alternative to
the custodial lending model. Their philosophy is focused on providing Tel: US +1 617 204 4500
clients with complete program customization, optimal intrinsic returns,
high touch client service and comprehensive risk management. Their Address: 175 Federal Street
process is to begin each client’s program with a competitive auction 11th Floor
to determine the optimal route to market for their portfolios or asset Boston, MA 02110, USA
classes whether it is via agency exclusives or traditional agency
lending. Tel: UK +44 (0) 20 7469 6000
This differentiated approach achieves best execution while delivering Address: 1st Floor, 10 King
their clients with greater transparency and control, allowing them to William Street, London,
more effectively monitor and mitigate risks. Additional information EC4N 7TW, UK
about eSecLending is available on the company’s website, Email: info@eseclending.
www.eseclending.com. com
Web: www.eseclending.com
Finace is currently the only fully integrated solution which supports T: +41 (0)44 298 92 00
the future business model within the areas of Securities Lending, F: +41 (0)44 298 93 00
Repo and OTC Derivatives Collateral Management. The architecture A: COMIT AG,
of Finace is based on a stable, leading edge technology platform, Pflanzschulstrasse 7,
which was developed with performance and robustness as the focus CH-8004 Zürich,
of design. With flexibility at its core, customer-driven extensions Switzerland
and modifications can be quickly and easily applied to the standard W: www.finacesolution.
component set. com
www.comit.ch
J.P. Morgan Worldwide Securities Services (WSS) is a premier To find out more, visit
securities servicing provider that helps institutional investors, jpmorgan.com/visit/wss or
alternative asset managers, broker dealers and equity issuers optimize contact:
efficiency, mitigate risk and enhance revenue. A division of JPMorgan
Chase Bank, N.A., WSS leverages the firm’s unparalleled scale, J.P. Morgan Worldwide
leading technology and deep industry expertise to service investments Securities Services
around the world. It has $15.3 trillion in assets under custody and $6.5
trillion in funds under administration. J.P. Morgan offers a complete Francis Jackson,
fund accounting solution, servicing a wide array of investment francis.j.jackson@
vehicles and fund structures with customized, full-service back-office jpmorgan.com or 44-207-
support. We service a broad array of investment products, including 3253742
mutual funds, private equities, partnerships and commingled trusts,
offering full support for high volumes of derivatives and complex Huw Williams,
instruments, including meticulous distinction between GAAP and tax. huw.c.williams@jpmorgan
or 44-207-7775434
Eagle Investment Systems LLC is a global provider of financial Eagle Investment Systems LLC
services technology serving the world’s leading financial institutions. The Bank of New York Mellon
Eagle provides enterprise-wide, leading-edge technology and Financial Centre
professional services for data management, investment accounting 160 Queen Victoria Street,
and performance measurement. Eagle’s Web-based solutions London
support the complex requirements of firms of any size including UNITED KINGDOM
institutional investment managers, mutual funds, hedge funds, EC4V 4LA
brokers, public funds, plan sponsors and insurance companies. Phone Number: 44 (0)20 7163
Eagle’s product suite is offered as an installed application or can be 5700
hosted via Eagle ACCESSSM, Eagle’s ASP offering. Eagle Investment E: sales@eagleinvsys.com
Systems LLC is a subsidiary of The Bank of New York Mellon W: www.eagleinvsys.com
Corporation. To learn more about Eagle’s solutions, contact sales@
eagleinvsys.com or visit www.eagleinvsys.com.
Advent Software 1 Bedford Avenue, London, WC1B 3AU, UK T: 0207 631 9240
Accuity Market House 124 Middleessex Street Bishopsgate London E1 7HY T: +44 20 7014 3454
Aquin Components GmbH Moosmatthalde 4, Meggen, CH-6045, Switzerland T: +41 44 455 62 44
BI-SAM 1 Cornhill, London EC3V 3ND T: +44 (0)20 3008 5834
Bravura Solutions Austin Friars House 2-6 Austin Friars London EC2N 2HD, UK T: 020 7997 3000
Calypso Technology 17 Dominion Street, London, EC2M 2EF, UK T: 020 7826 2500
DST International DST House, St Mark’s Hill, Surbiton, Surrey, KT6 4QD T: +44 (0)20 8390 5000
Princeton Financial Systems 600 College Road East, Princeton, NJ 08540, USA T: +1 609-987-2400
Redi2 Technologies, Inc, 1771 Broadway St., Oakland, CA 94612 T: +1 (510) 834-7334
SmartStream Technologies 1690 Park Avenue Aztec West Almondsbury Bristol BS32 4RA UK T: +44 (0)20 8390 5000
Witholding Tax
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A new word for
cross border
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