Automation in the investment fund industry has been increasing steadily as funds look to reduce operational costs through STP. Fund transaction network provider Calastone has been serving this industry since May 2008 and has seen seen a 6.5% growth rate per month in both revenue and transaction volumes. The providers network now routes over 1 million messages a month.
Further increases are expected over the coming year, notably in overall gross sales and redemptions for UK domiciled funds over a six-month period. According to the UK Investment Management Association gross sales for the six months ending January 2013 were 87.3 billion, while redemptions were 72.9 billion.
Among the latest innovations to further automate the investment fund industry is a service provided jointly by Calastone and Barclays. To facilitate this service, the companies will provide a settlement infrastructure for matched trades on a net basis, through a settlement account for each participant. Barclays will also make available various options for pre-funded or provisional credit facilities without a line fee to the user. Participants will not need to change their existing corporate banking relationship to benefit from the service.
The net settlement service allows mutual fund participants to match settlement instructions at an individual trade level. Once matched, settlement instructions will be netted for each settlement date, currency (initially sterling only) and counterparty combination. There is also an option to settle at sub-client and account level. The Calastone system will notify the participants of the net settlement amount, after which the participant would need to confirm acceptance of this. The confirmation would then initiate the payment to be made between the relevant counterparty accounts at Barclays.
Philip Goffin, executive director at Calastone, says: The Calastone and Barclays managed net settlement proposition, built for the funds industry by the funds industry is a true piece of innovation in a period where the market is undergoing huge regulatory change. The reduction in cash flow exposure combined with the improvement in oversight and efficiency make this market leading proposition unique in its design and were proud to be releasing it to the market.
Calastone and Barclays intend to add the Euro to their net settlement infrastructure in 2013.
(JDC)