Denmark’s custodians are increasingly needing a regional outlook to succeed

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Denmark’s custodians are increasingly needing a regional outlook to succeed

  1. 1. AST ISSUE006 WEDNESDAY ASSETSERVICINGTIMES 02.02.2011 www.assetservicingtimes.com CONTENTS Club Plus to review custodial arrangements Australian fund manager Club Plus Su- perannuation is to review its custody agreements page3 Euroclear Bank to support Brazilian securities Euroclear Bank will provide settlement,Citi to provide services in Kuwait custody and related post-trade services for all Brazilian equities and domestic fixed income securities.KUWAIT 26.01.2011 page4 Big interviewCiti’s Global Transaction Services business will be account management, settlements, safekeeping, pre- AST speaks to Tom Davis, CEO of Me-providing direct custody and clearing (DCC) services matching, registration, full asset servicing suite, income ridian Global Fund Services about theto clients investing in Kuwait. collection and payment of dividends and interest, market changes the fund administration industry claims, handling post-trade issues, cash management, has seen over the past couple of years.Citi is now open to service the Kuwait Stock Exchange foreign exchange, reporting, market expertise and infor- page6(KSE) taking Citi’s proprietary network, the largest in mation services to clients.the world, to 59 markets globally, of which 33 marketsare in Europe, the Middle East and Africa. This move will encourage and facilitate further interna- Country focus tional investment in Kuwait which will lead to a broaden- In a crowded and competitive market,The announcement was made at KSE’s headquar- ing of KSE’s investor base. Danish custody providers are expectedters in Kuwait in the presence of Hamed Al-Saif, di- to offer more and more as part of theirrector general of KSE, Anas Al-Saleh, chairman of “We continue to respond swiftly to investor demands service.the Kuwait Clearing Company (KCC), Ziyad Akrouk, and this is a further step towards providing high qualitychief executive of Citi Kuwait, and Richard Street, custodial services and easier access to Kuwait’s capital page5Citi’s head of securities and fund services for the market,” said Hamed Al-Saif. “We welcome Citi, as oneMiddle East. Also present were senior management of the leading global custodians, on board to assist with People moves Find out the latest hires, and who is get-from the three institutions. With this announcement, the continued globalisation of KSE’s investor base and ting promoted within the industry.Citi will start offering custodial services in the mar- to help increase foreign investment in Kuwait’s capitalket for KSE-listed securities. These services include: market.” page9 Cavendish picks Linedata HSBC implements AWD Cavendish Administration will use Linedata Icon to build a fully integrated HSBC Securities Services Transfer Agency has implemented globally the portfolio administration, fund accounting and reporting solution for its opera- image and workflow system AWD. tions. AWD is designed to facilitate operational efficiency gains in high-volume With over £1 billion of assets under administration, Cavendish is implement- functions such as shareholder subscriptions and redemptions, and account ing Linedata Icon to be able to expand its business, service more funds and opening. It also complements the TA client service and distribution support extend its service offering. model on a global basis. readmore p2 readmore p2
  2. 2. NewsInBrief agement, fund accounting, portfolio valuation, individual processes and relieve our staff ofCiti to provide services in collective fund pricing and reporting solution repetitive tasks is just as important.”Kuwait which has been subject to a recent programmecontinued from p1 of innovation and development to meet market Christian Widmer, CEO and chairman of Profi- expectations and regulatory demands. data, added: “IFM’s business model is compa-Akrouk emphasised the significance of this mar- rable to that of a Master KAG. It places the high-ket for the bank, saying: “Providing direct cus- “Fund administrators need to be able to deliver est demands on a fund administration. XENTIStody and clearing (DCC) services in Kuwait is an a streamlined, first class service in today’s envi- has stood the test in similar environments inintegral part of Citi’s plan to enhance its services ronment. Their clients are extremely demanding various countries. From those projects, Profi-in the country and falls in line with Citi’s long and expect the best,” said Mike de Verteuil, Line- data have gained sound and comprehensivestated objective of contributing to the meaning- data’s group business development director. experience which we will now apply to the im-ful development of the region’s financial mar- plementation at IFM.”kets in cooperation with solid partners such as “We have invested in Linedata Icon to ensureKSE and KCC.” it delivers the flexibility needed and efficiently handles the complexities which characterise Dealis completes migration ofDirect custody and clearing plays an integral today’s fund administration market. By using DekaBank fundsrole in the capital markets by providing the clear- Linedata Icon, Cavendish will be able to extending and settlement services required for broker its service offering to a greater number of fundsdealers and global custodians to support trading and meet their clients’ exacting due diligence re- Dealis Fund Operations, a joint venture com-and investing activities around the world. quirements. We’re proud to be supporting Cav- pany owned by Allianz Global Investors and endish’s growth in this area.” DekaBank with EUR 340 billion under adminis-Lee Waite, global head of direct custody and tration, has successfully migrated 1,300 mutualclearing at Citi, said: “Reaching 59 DCC mar- and special DekaBank funds onto its investmentkets is a milestone for our business and shows HSBC implements AWD management platform, SimCorp Dimension. continued from p1Citi’s unrivalled ability to respond to and supportour clients who will benefit from dedicated DCC “Following the successful migration, we are now The new technology was introduced over aclient service teams providing local expertise offering our system platform to other fund com- period of two years. HSBC clients now benefitcombined with globally consistent services.” panies in Germany and Luxembourg,” said Ro- from more efficient processing, reduced risk man G. Trageiser, spokesman for Dealis. “New and a standardised service across the variousWaite added: “We continue to expand our serv- customers benefit from our independence and TA locations.ices in the region and are encouraged by the ability to innovate. Owing to SimCorp Dimen-opportunities in Kuwait as well as the rest of the sion, we guarantee a highly flexible and cost- Gina Slotosch, head of global product manage-Middle East. This is another important achieve- effective response to individual customer needs, ment, transfer agency, HSBC Securities Serv-ment in our development strategy to embed our market demands and regulatory requirements.” ices, said, “AWD is supporting us to deliver asecurities and fund services capabilities within consistent offering to our clients and providesthe region’s world-class exchanges.” Since the formation of Dealis in late 2008, up the scalability for future growth. It will help us to 50 funds per week have been lifted onto the to optimise our business efficiency around the common SimCorp Dimension platform in anCavendish picks Linedata world and to complete our transformation ini- automated migration process. These includecontinued from p1 tiatives. Our clients will benefit through stream- 260 former Cominvest funds transferred by lined processes which will lead to an even better mid-2010, just a year after that company’s in-Cavendish was previously using proprietary customer experience.” tegration into Allianz Global Investors. Dealistools for its portfolio administration and sepa- now administers approximately 2,500 funds onrate systems for fund accounting and wanted tomigrate to a more sophisticated solution. FM selects Profidata’s XENTIS the platform. “This project’s success is an important signal to“Linedata led a workshop with us to explore, IFM Independent Fund Management in Vaduz, the market, especially in these times of generalmap and evaluate our existing systems and Liechtenstein, has selected XENTIS, the invest- consolidation,” said Dr. Jochen Müller, manag-processes,” said Anthony Lee, director, Caven- ment management platform of Profidata, to ing director of SimCorp Central Europe. “Thedish Administration. “This new system is com- support its fund management middle and back- Dealis case shows that SimCorp Dimension isprehensive and can fully support our ambitious office disciplines. the right platform, even for very large volumes.”growth plan and significantly improve our capa-bilities along the way. We believe that LinedataIcon will enable us to build upon the excellent Luis Ott, managing director at IFM said: “As a Bank of China allocates globallevel of service that we currently provide to bank-independent fund management company,investment management companies and the we offer our clients the greatest possible flex- custody mandatefunds they manage.” ibility in structuring their fund products. Hence, flexibility must be a key feature of the software BNY Mellon Asset Servicing has been selectedWith 45 clients in the UK and beyond, Linedata platform on which we run our fund administra- by China Construction Bank as the global cus-Icon is a complete back office investment man- tion. Also, having the means to automate client- todian for the upcoming QDII fund in China to 2
  3. 3. NewsInBrief ASTbe launched by Bank of China Investment Man- “We also recognised the efficiencies in consoli-agement Co. (BOCIM). dating our custody and transition management requirements into one provider.”The new fund will be called BOC Global Stra- ASSETSERVICINGTIMEStegic Fund (FOF) and is expected to launch inMarch 2011. BOCIM is a joint venture fund man- Citi wins new Banco de Brasilagement company between Bank of China and mandateBlackRock. Editor: Ben Wilkie Citigroup’s Global Transaction Services has benwilkie@assetservicingtimes.com“The pace of QDII approvals is expected to con- been appointed by Banco do Brasil to provide Tel: +44 (0)20 3006 2710tinue in 2011,” said Chong Jin Leow, head of a full suite of investor services including trus-Asia, BNY Mellon Asset Servicing. “This is wel- tee, custody, administration, transfer agencycome news. With QDIIs outperforming domes- and cash management to Banco do Brasil’s Marketing: Steven Laffertytic equity funds in 2010 for the first time since new Irish domiciled Qualified Investor Fund, BB design@assetservicingtimes.comthe financial crisis, thanks to an improving glo- Unit Trust Ireland, an open-ended umbrella unitbal economy, it is likely that more Chinese will trust authorised in Ireland by the Central Bank Publisher: Justin Lawsonseek to increase their international exposure via of Ireland. justinlawson@assetservicingtimes.comQDIIs in 2011.” Tel: +44 (0)20 8249 0235 José Ewerton Motta Nunes, head of distribution, Banco do Brasil, said: “By selecting Citi, we are Fax: +44 (0)20 8711 5985BNY Mellon’s Leow added: “As Chinese asset obtaining access to their high calibre technol-managers continue to diversify their portfolios Published by Black Knight Media Ltd ogy, expertise, global footprint and local knowl-through increased investment overseas, de- edge. Citi was able to provide us with a state-of-mand for global custody and related services 16 Bromley Road the-art solution that was flexible and matchedfrom institutions like BNY Mellon is on the rise. Beckenham the needs of our company.”We are a strong partner to Chinese asset man- Kentagers, bringing our global experience and deep BR3 5JE Richard M.F. Ernesti, global head of investorunderstanding of the infrastructure needed for UK services client & sales management, Citi, said:QDIIs to help them achieve their international “By winning this important mandate, Citi has re- Company reg: 0719464growth ambitions.” ceived a strong acknowledgement from Banco Copyright C 2011 do Brasil – one of the oldest financial institutions Black Knight Media Ltd.Club Plus to review custodial in the world – for our investor services solutions All rights reserved. and products. Banco do Brasil will benefit fromarrangements our network and breadth of services to help it To subscribe please visit seize the advantages of the current investment www.assetservicingtimes.comAustralian fund manager Club Plus Superan- environment”.nuation is to review its custody agreements. SIS Fund Services CompletesThe $1.3 billion fund currently uses NAB AssetServices as its master custodian, a relationship that Type I SAS 70 Examinationgoes back to the fund’s launch three years ago. ISIS Fund Services and its wholly-owned sub-The CEO of Club Plus, Paul Cahill, is running sidiary, ISIS Fund Services USA, have recentlythe tender and said companies must meet over completed a Type I SAS 70 examination as of100 requirements across a broad range of cus- October 31, 2010 that was performed by a bigtody operations. four independent accounting firm. ISIS intends to obtain a Type II SAS 70 in 2011.“We sent out a document asking for information, AICPA SAS 70 is a recognised reporting stand-based on what they return we’ll then determine ard that allows service providers to disclose inthat then,” he said. detail their control activities and processes to their clients and their customer’s auditors in aNorthern Trust selected by uniform reporting format. The independent TypeKensington & Chelsea I SAS 70 examination for ISIS consisted of an evaluation of the description of controls related to fund accounting (which includes new fund setNorthern Trust Global Investments has won the up, transaction processing, cash and positionmandate for transition management services for reconciliations, valuations, cash receipts andthe Royal Borough of Kensington and Chelsea. disbursements, NAV calculations, performance and management fee processing and financialNorthern Trust will also run a $129 million in- statement reporting), investor services and in-dex portfolio for the next six months. The bank formation technology (which includes logicalalready provides custody services for the Bor- and physical access security, change controlough’s $721 million in assets. management, and system back-up and recov- ery processes).Royal Borough of Kensington and Chelseahead of financial services Paul Kidd said: “We “Completing a Type I SAS 70 is an importantappointed NTGI based on their track record of and critical step for ISIS to take to compete in anperformance in providing custody services to us ever more challenging fund administration envi-since 2009, as well as their strong reputation for ronment. The annual performance of the SAStransition management. 70 examination demonstrates our commitment 3
  4. 4. NewsInBriefto quality, confidentiality and maintaining a high A number of Euroclear Sweden clients, repre-level of internal control,” said Brian Desmond, senting the fund management, transfer agentISIS COO. and fund distribution community, have signed up as pilot users. These include: Carnegie Fonder,SGSS mandated to provide Catella Fondförvaltning, Nordnet AB, Öhmanasset servicing for Allianz Fonder and Öhman Fondkommission. For all your Björn Pettersson, head of administration at Carn-Societe Generale Securities Services (SGSS)has been mandated to provide a range of serv- egie Fonder, is very positive about the initiative. “We welcome and take an active part in the de- Securities Financeices to Allianz Global Investors InvestmentsEurope in France and Italy. AllianzGI IE, Allianz velopment of Euroclear Sweden’s fund services. We believe the initiative will create more efficient, needs SunGard hasGlobal Investors’ European investment plat- secure and standardised administration of the ul-form, offers tailor-made investment solutions to timately, the end investor,” he said.institutional and retail clients across Europe. This new fund service at Euroclear Sweden isIn France, AllianzGI IE has renewed its existing a core part of Euroclear’s overall objectives for a solutionmandate with SGSS for depositary bank serv- investment fund processing; a fully automatedices provided since 2003. pan- European investment fund solution giving www.sungard.com/securities nanceIn Italy, AllianzGI IE will rely on SGSS to provide all Euroclear clients easy access to domesticdepositary bank fund administration and trans- and international funds, as well as a choice offer agency services for its full range of funds. services and connectivity options.This mandate, which is subject to regulatoryapproval, concerns over 60 funds and 9 billion Euroclear Bank to offer post- I need to see credit limit breaches when Ieuros of assets. trade services for Brazilian book a trade - I don’t have truly real-timeSGSS has been selected, in particular, for its securities global position management - I have tomanagerial capabilities within the framework of provide locate authorization codes to myits pan-European platform, which are necessary Euroclear Bank will provide settlement, custody day traders - I have to maintain the correctto serve the needs of investment managers with and related post-trade services for all Brazilian level of debit/margin balance all the time - Ipan-European reach, such as AllianzGI IE. equities and domestic fixed-income securities from January 31. am unable to bene t from hot stocks tiedEuroclear Sweden to automate up in my margin/debit balances - I have Transactions in these securities will be sent to multiple systems that don’t talk to eachfund-transaction processing Euroclear Bank’s local agent for processing in other - Integration is a nightmare! - one of the three Brazilian central securities de-Euroclear Sweden has announced the launch of Managing multiple technology vendors positories (CSDs).its inaugural service to automate and standard- take too much of my time - Many of myise fund-transaction processing. Fund manage- The three CSDs are Câmara de Custódia e Liq- operational activities are highly laborment firms, fund distributors and transfer agents uidação (CETIP) for corporate bonds, Compan- intensive - I only have time to sort out thein Sweden may now benefit from automated hia Brasileira de Liquidação e Custódia (CBLC large billing discrepancies - I am missingfund-transaction order routing between relevant BM&F BOVESPA) for equities, and Sistema Es-parties and settlement of the cash-related part pecial de Liquidação e de Custódia (SELIC) for corporate actions that impact theof the transaction on a straight-through process- government bonds. Euroclear Bank previously pro tability of a trade - I have to work verying basis at Euroclear Sweden. signed Memoranda of Understanding with CE- long hours to sort our billing discrepancies -I TIP and CBLC in 2007 and 2008, respectively. can’t take risks when choosing the supplier forEuroclear Sweden’s fund service will be extend- my mission critical solution - I need to seeed to include automated fund-unit settlement Frédéric Hannequart, chairman of the board of credit limit breaches when I book a trade - Iand asset servicing by mid-2011. In subsequent Euroclear Bank, said: “Brazil’s capital markets don’t have truly real-time global positionphases, fund investors will also be able to hold are attracting growing international investortheir fund units in the same Euroclear Sweden management - I have to interest. Our clients will now be able to settleaccount where they already hold their equity transactions in Brazilian domestic securities maintain theand fixed-income positions. Euroclear Sweden correct level through our agent, Citibank, in the Brazilianalso aims to provide registry services for fund of debit market. This is a very important development inmanagement companies. reinforcing our commitment to the Latin Ameri- marginAnders Löfgren, head of product management can region and in extending the scope of our balance allat Euroclear Sweden, said: “The Swedish fund services to clients. We will continue to work with the time -market, which includes over 1,300 funds with an the Brazilian authorities and market infrastruc- I can’t doestimated value of EUR 200 billion (SEK 1.9 tril- tures on the development of useful services tolion), is a sector where Euroclear Sweden can Euroclear Bank clients involving Brazilian do-add value by reducing back-office processing mestic securities.”costs and risks through automation and stand-ardisation. The consolidated and comprehen- Brazil is the third Latin American market where Euro-sive fund service that Euroclear Sweden will of- clear Bank offers services for domestic securities.fer is filling a gap in transaction processing thatshould cut client processing costs, compared As of September 2010, the total foreign hold-with conventional manual processing proce- ings in Brazilian securities amounted to EURdures. We also intend to leverage Euroclear 240 billion (of which EUR 65 billion are fixedBank’s cross-border FundSettle service in pro- income and EUR 175 billion are equities). In ad-viding Swedish firms with access to over 50,000 dition, there are EUR 120 billion ADRs (Ameri-foreign funds and trading counterparties from can Depositary Receipts) and EUR 15 billion inover 30 markets via Euroclear Sweden.” Eurobonds denominated in the Brazilian Real. 4
  5. 5. TomDavisOversight managementTom Davis, CEO at Meridian Global Fund Services, talks to Asset Ser-vicing Times about how the fund administration industry has changed EXCLUSIVEAST: Could you tell us a bit about your- all hedge fund performance, market conditions, and with the implementation of Dodd Frank itself and Meridian Fund Services? and redemptions, we saw a decrease in the as- will be interesting to see the impact that legisla- set values of the funds we administered. tion has on fund governance within the US inTom Davis: Well, I’m Bermudian and have been terms of the funds organised there.involved in fund services for my whole career, But then everyone realised that “unregulated”mainly at Bank of Bermuda and then later at Ol- hedge funds weren’t the main culprits behind AST: How is Dodd Frank and otherympia Capital. Meridian Fund Services, which the financial crisis - the regulated banks were. legislation affecting your business?had been formed in 1996, was affiliated with an High net worth investors tended to exit the mar-investment management company in which my ket rather than the institutions, but we started Davis: People are looking at a division of du-brother was a partner. In 2000, I joined the firm to see them come back. By the second half ties. Fund administration prior to the downturnand separated out the fund services operations of 2009 the tide had turned, and at the end of was seen as a calculation process, somethingfrom the investment management activity and I the year and throughout 2010 we have seen a that gave credence to what had already beentook over Meridian’s fund services operations. strong recovery for both the funds we adminis- calculated in house. ter and the funds that are starting up.In 2004, we opened our fully operational New But now investors want to see fund administra-York office because we wanted a presence in In the US, fund managers that traditionally per- tors involved in the reconciliation and valuationthe city - I feel you still need face to face con- formed their NAV calculations in house are now process. We’re seeing a growing industry oftact with the principals at the hedge fund firms. I being forced to outsource that work and we firms that specialise in hard to value securities.found someone to help me set it up, Randy Troy, have been able to take advantage of that new Administrators are serving as the independentwho had previous experience as a controller standard in the industry. check and balance that institutional investorsat a sizeable hedge fund. The New York opera- AST: Is the recovery coming from have recently been demanding.tion is a very strategic component of our overall the growth of existing funds, or is itoperations, and has been particularly important new entrants to the market? AST: Are economies of scale thereover the past couple of years. in the fund administration industry? Davis: I think most of the recovery is money go- Do you have to be a big firm with aIn 2006/7, finding high calibre accountants in ing to established managers, but we are starting global footprint to succeed?New York and Bermuda was proving very dif- to see new managers entering the market. Asficult. As a result, we set up an operating pres- Davis: It’s starting, or restarting, to look that the prop trading desks in banks start to shrink orence in Nova Scotia in January 2007, which way. Back in 2008/9, it was all about survival, disappear, traders are moving on and setting upwas, and still is, headed by Patrick Donnelly, a but in 2011/12, administrators will be asking if their own hedge funds. However, we don’t tendtwelve year veteran of the hedge fund admin- they need to consolidate, if they need to ex- to see as much business from those manag-istration industry. We didn’t want to go down pand, and what they need to do to compete. ers as they generally have existing relationshipsthe India route, as Canada is closer, has great with service providers arising from their careers I don’t think you necessarily have to have $100educational institutions, and is more familiar to at the banks. billion under administration to compete, butpersons working in our industry. We also have probably $15-30 billion to have the scale youan office in the Cayman Islands and our IT is run In addition, although we are starting to see new need. Larger clients don’t want to be too big aout of Massachusetts. managers entering the market, the amount proportion of your assets. They appreciate the needed to properly launch a fund is increasing,We did look at expanding into Europe in 2007 extra level of service a smaller administrator because the costs of the infrastructure neededbut even then we could see the chilly winds usually provides, but on the other hand their in- to support a fund have increased.heading our way, so we held back. It’s still an vestors are seriously looking into the financialoption for us though and we’re keeping an eye AST: Do you feel the reputation of integrity of the administrator - that’s the level ofon the development of legislation over there - the industry has been harmed over due diligence we’re seeing.the jurisdiction of choice itself will be decided the past couple of years? I think we’ll see that the main reason for consoli-based on availability of resources and the local Davis: Within the offshore market, there has dation is to provide a global solution. For Merid-regulatory environment. always been an emphasis on due diligence, ian, we can expand on our own, or we can find aWe mostly operate within the hedge fund indus- anti-money laundering, and governance. The European group without a North American plat-try but there are some different programmes offshore fund industry gets so much bad press form and through a strategic alliance or mergerwe administer that have a relationship with our and has become the whipping boy for anything offer a combined service. We need to look athedge fund clients - for example, in Bermuda, wrong with the financial industry as a whole. Asia too. So there will be more consolidation,we perform administrative services for a pen- So we have almost had to assume that every but will it be on the same scale as the banks? Ision fund that uses hedge funds. Historically dollar we work with is laundered until we can don’t know.we have only been appointed to service hedge prove otherwise. The regulators in the US have constantly been looking at what we do in this AST: What’s your view of 2011?funds because the mutual fund sector tends tobe very institutionalised and as such the large respect and challenge us to prove that we have Davis: Everyone is optimistic. There’s still risk,players dominate the industry. real substance in places like Bermuda and the and we’re not out of the woods yet, but the out- Cayman Islands, not just informal structuresAST: How do you feel 2010 was for the look is positive. The hedge fund market in par- that could be used to hide the origins of dodgyindustry and for Meridian in particular? ticular is quite exciting. The hedge fund industry cash. The infrastructure is already in place and came out of the correction of 2008 extremely we are ready to meet the challenge.Davis: For us, 2010 was a good year. In the well. And the role of the fund administrator issecond half of 2008 and the first half of 2009 we In the last couple of years fund governance is also very exciting. But it’s not the same role asdid not lose many funds, , but because of over- also being scrutinised by institutional investors we have historically seen. AST 5
  6. 6. CountryFocusDenmarkDenmark’s custodians are increasingly needing a regional outlook to suc-ceed in a very competitive and fast-changing market EXCLUSIVEDenmark has long been a well-regarded domi- failing link away from the Danish scene and has consultation process at this very moment.”cile for funds, and the back office has a reputa- made the market more attractive from a cross Many international financial institutions tendtion for efficiency and high value at relatively low border cost perspective. It might also have con- to class Denmark as being simply part of thecost. It’s also seen some changes over the past tributed to a safer and more predictable market greater Nordic market, along with Sweden, Nor-few years, and expects greater automation and even if all current European clearing models way and Finland - and occasionally with the Bal-efficiencies over the coming years. leaves a few things to be desired on that ac- tic states of Estonia, Lithuania and Latvia. count. A related effect of CCP is that banks haveThe introduction of CCP in 2009 was undoubt- developed more sophisticated and advanced But there are distinct differences. While Finland,edly the biggest event in the post trade market risk management models, partly in response to Sweden and Denmark are all members of thefor the past five years. “This has completely the nature of a clearing environment but equally European Union, it’s only Finland that is a eurore-shaped the operative models and also the so in response to market supervisory powers country, and Norway is not a member at all.revenue situation,” says Ulf Noren, global head requirements and own managements ditto forof sub custody at SEB. “Going from a situation counterparty risk control. But there has been significant consolidation.where exchange trades where settling bilater- The stock exchanges of the four countries areally in 1:1 relationship to a situation with netting “A surprising effect of the CCP introduction (even closely linked as part of the OMX Group, andhas not made great wonders to sub-custodian’s if apples not necessarily are compared with ap- the major regional players all offer a one-stopgross revenues. On the other hand, this devel- ples here)is the lowered settlement rates - an is- custodial service for the area. The likes of Nor-opment has been supported by us as it takes on sue that is addressed by an informal CSD/Bank dea and SEB all have a significant presence 6
  7. 7. CountryFocusbut there is still room for local providers such But there are also regulatory issues that prevent “The industry do make their voice heard but it isas Danske Bank. Big international players also the growth of the mutual fund market. Under really hard to do so without intermediary forceshave a role, with Northern Trust, State Street Danish law, the manager of a locally domiciled like European industry associations or MoFs etc.and others all making a mark. fund is a company that is appointed by the asso- The key regulatory initiatives to shape this indus- ciation of investors in that fund. The depositary try going forward are in our view: Securities Law“The Danish sub-custody market is dominated by bank or custodian must be a Danish bank and is Directive, EMIR, CSD Regulation, UCITS IV & V,two regional players, SEB and Nordea, in addition often the promoter and distributor of that fund. AIFMD, PSD, SEPA, MiFID II, Basel Rules andto one local player of some size in the sub-custody the Dodd Frank Wall Street Reform.”business, Danske Bank,” explains Noren. “This isa trend that has been evident since 2003/2004 Issuesand it shows no signs of stopping. While the back office in Denmark is well-regard-It can be difficult for a domestic player to punch ed, problems do remain, says Noren: “There are Noren: We will contin- a number of key issues specifically in Denmark:its weight, says Noren. “For cross border busi- ue to see local Danishness into Denmark, most definitely so. We willcontinue to see local Danish banks and smaller “First is the comparably weak performance of the CCP - is key features like partialling per- banks and smaller re-regional banks continue losing business to thetwo Nordic larger players. This is not saying that formed in an ultimate way and has the CCP/ CSD set-up added value or introduced new ob- gional banks continuelocal players are not doing a formidable job,they are just victims of a trend that has been stacles to efficiency? losing business to theongoing for more than a decade and picked upspeed some seven or eight years ago. “There is also the discussion on punitive actions two Nordic larger play- by the CSD for settlement fails, something SEB generally does not want to see as a first resort, ers. This is not saying“As a result of this, regional players have invest- only as a last one when the avenues on effi-ed heavily into the regional service provision and ciency improvements have been fully explored- that local players areprimarily so into bridging the differences between more on that in the belowthe four Nordic markets. This focus has also not doing a formidablebeen noted by infrastructure and regulators local- “We also have to deal with the full implementationly, meaning that regional suppliers to a very high of the practical terms of the shareholder directive. job, they are just vic-extent now also have taken the role as speaking When true voting procedures can be introduced tims of a trendpartners (and thereby to some extent also influ- without excessive segregation, a lot will be achievedencors), something that is of crucial importance in the perception of Asset Servicing Qualityto the foreign client base. At what pace will thiscontinue? If nothing else changes, I would saythat this will be a quick process but as we stand “When buying services in Denmark, the focusin front of some really big changes in the post is still very much on price and reciprocity. It is The futuretrade universe, of which T2S is the biggest, I pre- though encouraging to notice that the quality el-dict pace to be moderate for the next three or ements have travelled higher up on the agenda. As to the future, Noren remains positive: “I thinkfour years. This is naturally due to a need for the So has thought leadership. As margins in the in- that 2011 & 2012 will continue to be financiallyinternational client base to work out their future dustry have become very low, buyers are scru- challenging and that whatever is happeningEuropean strategy and the sub-custodians’ abil- tinising efficiency elements. No one can afford thereafter very much will be dependent of howity to show viable proof that they have the right to pay for inefficiency and no one can afford op- the regulatory scene plays out. On a positivethinking and will survive. Very few will.” erational mistakes. We believe that this will lead note, I think that a few banks (in which league to new operating models being introduced inde- SEB intends to stay) will benefit from positional pendent from the strong mega drivers like T2S. changes primarily driven by T2S (whether or not We also think that providers who can demon- T2S happens according to plan). This will enevi- Noren: A related effect strate sustainable models will be rewarded. Be- ing able to speak the cross border clients voice tably lead to further consolidation and pair that with infrastructural changes, you will see a fu- of CCP is that banks will also be of ever increasing importance. “ ture where every card must be played carefully. have developed more sophisticated and ad- Regulation “For Denmark specifically, I would like to see practical implementation of the shareholders’ di- rective, I would like to see a harmonised practice vanced risk manage- As part of the European Union, Danish funds and custodians are going to be affected by the raft of for the treatment of hold & release functionality among the three sub-custodians so that proper ment models new legislation, but practical changes have yet to predictability can be introduced and standard au- filter through, says Noren: “It has not had a great toborrowing functionality implemented across the visible impact yet. It will though. We have never line. I would like to see true efforts being madeFunds seen this amount of regulation in our sector be- by legislators/practitioners allowing proper use of ing either implemented or in its final decision omnibus accounts and I finally would like to seeUnlike neighbouring Sweden, where virtually stages. Post trade development has become a the CSD encouraging increased efficiency effortseveryone is an investor, Danes simply don’t in- process that to a great extent is politically driven. rather than implementing punitive fees and worstvest in mutual funds - less than 20 per cent of For service providers it poses a number of chal- of it all, a mandatory lending pool!” ASTthe population has a stake in mutual fund. And lenges: Management time has to become morethe situation is unlikely to change. and more devoted to this, investment budgets will to a greater extent be consumed by manda- next issue:There are tax advantages for Danes to use in- tory development and the compliance issue isstitutional pension schemes and buy financial becoming really big. I suspect a fairly substantial Fund Administrationproducts through insurance companies. Bondsand cash savings accounts are also popular. number of organisations will struggle in declaring that they are truly compliant. Luxembourg 7
  8. 8. Ten markets, ten cultures,one bank.For further information please contact:Global Head of GTS Banks: Göran Fors, goran.fors@seb.seGlobal Head of Sub-Custody, GTS Banks: Ulf Norén, ulf.noren@seb.seGlobal Head of Client Relations and Sales, GTS Banks: Patrik Thiis, patrik.thiis@seb.se
  9. 9. PeopleMovesIndustry AppointmentsRBC Dexia has appointed Sébastien Dan- securities and financial technology to his new novative products – such as our asset valida-loy as managing director for Luxembourg. role at Swift, where he was previously head tion-price verification service – that help fundThis appointment will be effective on 2 May, of product management. He joined Swift in managers satisfy today’s investor audience.2011 and is subject to regulatory approval. 2004 from the consultancy Capco, where heDanloy will be responsible for building the busi- was involved in large front-to-back automa- “Alan will lead a global team focused on lev-ness by focusing on market strategy, strategic tion programmes in the various securities eraging and integrating capabilities across ourclient management and effective engagement areas. His professional experience also in- business – from administration and risk report-with local industry, government and regulatory cludes work at Euroclear, where he led prod- ing to cash and collateral management. Newbodies. Danloy will report functionally to Tony uct management for communications services. offerings like prime custody and rising demandJohnson, global head, sales & distribution. for middle-office outsourcing will also drive “The securities market is a very strate- growth in the years ahead,” Ruane added.“Our Luxembourg operations are central to the gic and active area for Swift,” said Gottfriedpromotion of our onshore/offshore strategy, Leibbrandt. “Fabian’s understanding of the Since June, Flanagan has served as interimwhich is designed to help clients expand globally, global securities market coupled with his head of AIS global product management, whileas well as servicing them in their home markets,” extensive Swift background make him a per- continuing in his role managing the group’ssaid José Placido, CEO of RBC Dexia Investor fect fit to lead a team that will deliver new private equity administration product set.HeServices. “We look forward to Sébastien capital- levels of value to the securities industry.” also was primary lead for the European inte-ising on his long list of accomplishments and ex- gration of the PNC Global Investment Serv-perience to achieve RBC Dexia’s goal of max- Separately, Swift recently named Brett Lan- icing business, acquired by BNY Mellon inimising growth across our European footprint.” caster as managing director, securities July 2010, and has been instrumental in de- initiatives, Americas. Lancaster joins from veloping plans for the BNY Mellon and GISPrior to joining RBC Dexia, Danloy served as The Depository Trust & Clearing Corpora- banking entities in Ireland and Luxembourg.global head of sales & relationship manage- tion (DTCC) where he was vice president ofment for Société Générale Securities Services. the Global Corporate Actions business unit. Phoenix Fund Services has appointed SophieIn this role, he was responsible for manag- Panchal head of hedge fund sales. In this newing sales & relationship management activity In his new role at Swift, Lancaster has re- role she will be working closely with Anthonyacross all countries and business lines and for sponsibility for driving securities initiatives in Wolfe, Phoenix’s business development director.defining and implementing the sales strategy.. the Americas, such as corporate actions, col- lateral management and electronic trade con- Panchal has 14 years experience in finan-Fabian Vandenreydt has been named head firmation messaging solutions. He is a mem- cial services, covering roles in financial man-of securities and treasury markets at Swift. ber of the Swift Americas management team agement, investment research and more and will report to Chris Church, chief execu- recently selecting hedge funds and creat-He will report to Gottfried Leibbrandt, head of tive, Americas and Global Head of Securities, ing portfolios for a fund of funds and for pri-marketing. In his new role, Vandenreydt will SWIFT. Brett is based in Swift’s New York office. vate clients. Her career started at Goldmanwork closely with Chris Church, global head of Sachs in London, embraced roles at Aonsecurities at Swift, to support the overall growth Alan Flanagan has been named head of glo- Consulting and Nedgroup Investments andof the securities business at the cooperative. In bal product management at BNY Mellon Alter- most recently UBS Wealth Management.this capacity, he will focus on the development native Investment Services. He will continueand delivery of value-added solutions to invest- to be based in Dublin and reports to Brian Ru- Anthony Wolfe, business development direc-ment managers, brokers, central securities de- ane, BNY Mellon AIS chief executive officer. tor at Phoenix Fund Services, commented: “Ipositories (CSDs) and asset servicers. Fabian am delighted that we have been able to attractwill also look at expanding Swift’s scope in trade “The alternatives industry will see continued someone of Sophie’s calibre to drive Phoenix’smatching, in the areas of FX, equities, fixed in- progress in 2011 and will look to trusted provid- business growth in the alternative asset class. Itcome and commodities. In addition, he will lead ers like BNY Mellon to service the array of com- reflects Phoenix’s commitment to building on ourinitiatives targeted at the reference data space. plex new funds, structures and strategies being success to date in servicing hedge funds and in- introduced,” said Ruane. “In his new role, Alan vestment managers who wish to take full advan-Vandenreydt brings 20 years’ experience in will only sharpen our ability to deliver timely, in- tage of Ireland as a fund administration centre.” Raising The Bar In Recruitment Telephone: +44 (0)20 7959 2440 | Email: enquiries@hornbychapman.com Web: www. hornbychapman.com | Postal: 68 King William Street, London, EC4N 7DZ, UK 9

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