Northern Trust appoints Clearstream to undertake third-party fund processing

Northern Trust has appointed Clearstream to handle the third-party fund processing of their investment fund activities using its Vestima platform.

This comes as regulators have pushed for more efficient fund processing and custody solutions to ensure better security for clients’ fund assets. Clearstream’s fund custody offering and its ability to process the entire client portfolio on a single platform enables automation and asset security thereby meeting these new regulatory standards.

Philippe Seyll, head of investment fund services and co-CEO at Clearstream Banking, said Northern Trust would use Clearstream to provide order-routing, delivery-versus-payment (DVP) settlement and custody for their investments into third party funds.

This comes almost one year after Clearstream acquired Citco Global Securities Services (CGSS) in Cork, Ireland. The acquisition came following customer demand for increased processing of large hedge fund portfolios.

“The acquisition by Clearstream of CGSS played a major factor in our decision. Just as we use sub-custodians to look after equities and bonds in certain countries, it makes sense to utilize a market specialist to look after our fund managers’ safekeeping and trade execution. Clearstream have size, scale and capability. The decision to outsource was straightforward,” said Toby Glaysher, head of Northern Trust’s Global Fund Services business in Europe, Middle East and Africa.

The UK’s Financial Conduct Authority (FCA) announced major changes to the client money rules and amendments to custody rules in its Client Assets Sourcebook (CASS) in 2014. It introduced rules designed to bolster firms’ systems and controls around segregation, recordkeeping and reconciliations. Glaysher highlighted Northern Trust already adhered to the highest regulatory compliance standards and said the decision to outsource was a strategy decision.