May 2009

Nordic region - Securities Services Volume 6 No. 39

GBP 25 - UK, ROW
New Model Banking - USD 45 - America
Risk Culture EUR 35 - EMEA
www.ISJ.tv
Panel -
Cayman, Bermuda, Caribbean
domiciles - doomed or defiant?

Prime broken
The brokerage reshuffle continues

India - Custody
Profile - T. Andrew Smith, Butterfield Fulcrum
MTFs - MiFID and the markets

THE GLOBAL SECURITIES SERVICES INDUSTRY MAGAZINE

Front Cover ISJ39.indd 1 08/05/2009 18:56

 Presented by
The North American
Securities Lending Forum GSL |
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Lending

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The increased regulatory environment and its
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Front Cover ISJ39.indd 2 07/05/2009 16:59

 ISJ Investor Services Journal Heads up

P.12 Profile P.08 New Model Banking P.22 Analyse This P.30 Panel Debate P.35 MTFs

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 F32
U M33 35 36in 37
p er34capita C E 38
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25
25.0
Funds under management per
P.06 News 2 0 .2
XXX capita in CEE between 1:20 and
The latest updates in 3 ,0
1:20 0 0 compared to Austria.
Developing
custody, clearing and transformation
2 ,0 economies
settlement, securities Emerging SOURCES: Local central banks,
lending, legal and 0 .9 1 .0
transformation
EUROSTAT, Erste Research & Devel-
1.01 ,0 0 .7
economies
compliance and 0 .6
opment
technology. 0 .0 0 .0
Editor: Ben Roberts 0 0 ,0
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Source : Loc al c entral banks , Euros tat , ERST E R es earch & Development

Editor’s Letter
Contributors:
Brian Bollen, Hardeep Dhillon
Anthony Harrington

Account managers:
Tarik Rekiouak The whole hog rebuilding their stamina Right on time, ISJ analyses

T
tarik.rekiouak@2i.tv
Mark Needham he initial hype over with strong company results. the success of the new MTFs
mark.needham@2i.tv
swine flu might have That we are technically in a on page 35, collecting some
Senior account manager: subsided a little by now, bull market - based on the trenchant industry insight.
Patricia De La Grange
trish.delagrange@2i.tv though the World Health gains seen on Wall Street, Few areas of securities
Business development manager: Organisation adds that it London, and Paris in a finance have seen such a shift
James Olweny
james.olweny@2i.tv
still might come back ‘with a short time period - may be as prime brokerage. Against
vengeance’ in a few months. disingenuous. But a slight the classic service model
Website design:
Peter Ainsworth Sound familiar? The shift in mindset within all of obtaining leverage and
peter.ainsworth@2i.tv
fabled ‘green shoots’ of departments of financial borrowing stock, investor
Systems developer: Kushtrim Ukaj recovery that pushed institutions will need to services in this space now
kushtrim.ukaj@2i.tv
through market data analysis be the first step to looking have to be more in-depth,
Data administrator:
Annika Elvrum at the beginning of last on the bright side of life more tailored to the hedge
annika.elvrum@2i.tv month are now similarly again, with losses stemmed fund, especially as hedge
Designer: Nisha Vijayan curbed by warnings that and gains, new clients and funds continue to operate a
nisha.vijayan@2i.tv
the worst might not yet be opportunities on the horizon. multi-prime strategy. One
Operations manager:
Sue Whittle
over. Country-by-country Certainly ISJ.tv discovered bank even terms it “advanced
sue.whittle@2i.tv forecasts for both the depths a forward-looking prime services” – read more
Commercial director: that an economy can fall, conference in the form of on page 14.
Jon Hewson
jon.hewson@2i.tv and when it will start to grow TradeTech Europe in Paris A recurring theme
CEO: Mark Latham
again, have been remarkably last month. It was a fertile this month has been the
mark.latham@2i.tv varied between national forum for new launches, empowerment of the
2i Media governments, the European with inspiration drawn investor. Transparency
UK: 16-17 Little Portland Street,
London W1W 8BP, UK
Commission and other tea from the necessity of risk and segregated accounts
T: +44 (0) 20 7299 7700 readers such as the IMF. Have consideration, data security, continue to be more
F: +44 (0) 20 7636 6044
enough market players built operating transparency common requirements of
USA: 410 Park Avenue, 15th Floor
New York, NY 10022 up their immune systems? and cost considerations. fund managers; ISJ found
T: +1 212 231 8421
F: +1 212 231 8121
The body of the global The growth, challenges and this particularly in discussion
markets is certainly in a implications of the new with T. Andrew Smith at
© 2009 2i Media
All rights reserved. No part of this better bill of health than at multi-lateral trading facilities Butterfield Fulcrum, whose
publication may be reproduced, in
whole or in part, without prior
the beginning of the first were ubiquitous in both the new role and market outlook
written permission from quarter, with State Street and general conference hall and are profiled on page 12. 
the publishers.
ISSN 1744-151X. Erste Group, in particular, the industry panel debates. Ben Roberts, Editor
Printed in the UK

1-16 ISJ39_A.indd 1 08/05/2009 19:23

 Contents ISJ Investor Services Journal
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

Contents
In this issue

David Aldrich, page 15

04 Letters to the editor
06 News and mandates
COVER STORY The last month of updates in
custody, clearing and settlement,
securities lending, legal and
compliance and technology.
08 New Model Banking
- ‘Risk management
needs to get
empowered’
Analysing SimCorp StrategyLab’s
risk management survey and
tapping industry expertise.
30 ISJ Panel Debate -
People
12 Profile - T. Andrew
Smith at Butterfield
Fulcrum
Ben Roberts interviews the
new global head of business
development and marketing.
Prime Brokerage
Prime broken
Evolution, page 14
14 Prime broken - Prime
Brokerage
New models and mndset have
transformed the prime brokerage
world, finds Anthony Harrington.
Custody
18 Sub continent sub
custody - India - The
MEMBER - periodical
publishers association
potential for growth in the mutual
and pension funds space is there,
with the right market conditions,
finds Ben Roberts.
www.abc.org.uk
24 Statistically speaking -
SunGard
Andrew Shinn provides
commentary on the different
trends in securities lending and
collateral.
26 Our friends in the
North - Nordic custody
Hardeep Dhillon analyses the
Nordic market as key players
continue their steady expansion
into the Baltic region .
Fund Administration
Nick Matthews Panel, page 30
Cayman, Bermuda and
Caribbean domiciles
Offshore centres have been under
huge scrutiny from regulators and
politicians. ISJ brings together
industry wisdom to assess it all.
Clearing & Settlement
35 Fair trade? - Multi-
lateral trading
facilities Brian Bollen
assesses the effect of MTFs on the
market.
Fair trade? MTFs, page 35
38 Superbanks - Getting
consolidation right
Nigel Walder, CEO of Business
Control Solutions, highlights the
key areas to address when banks
merge.
40 Directory of services
The company listing.

TO RENEW YOUR SUBSCRIPTION 22 Analyse This - CEE

PLEASE TELEPHONE:
+44 (0)20 7299 7700
Region - Erste Group provides
OR VISIT... WWW.ISJ.TV market commentary.
Superbanks
Nigel Walder, BCS comment, p38

1-16 ISJ39_A.indd 2 08/05/2009 18:42

 AD - Fund Forum

1-16 ISJ39_A.indd 3 07/05/2009 18:15

 Letters
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
Dear ISJ
Letters
T he issue of client report-
ing in the investment
management industry is,
unsurprisingly, at an all time
high.
The fall in asset prices and
investment performance
stemming from the world-
wide financial crisis, coupled
with the intense scrutiny
resulting from Madoff and
many others ‘smaller’ inci-
dents has highlighted the
need for the industry to start
addressing investors’ de-
mands for more clarity and
understanding of what they
have invested in, why and
whether these investments
fall within their guidelines.
Whilst the shock of the
credit crunch has created
a convenient snare for the
issues of liquidity, transpar-
ency and accuracy, we believe
that a number of strategic
industry trends are driv-
ing client reporting up the
agenda. There is a concrete
and clear need for ‘substance
over form’ in the investments
industry.
With the increase of
outsourced services for the
middle office, outsourced
services providers must offer
asset managers flexible data
and have workflow processes
in place, so that investors can
augment, contextualise and
enrich the data internally in
a timely and consistent man-
ner. Institutional clients often
invest through managed
accounts. These vehicles pave
the way for greater transpar-
ency and protection of client
1-16 ISJ39_A.indd 4
assets. However the reporting
flexibility, volumes of data
and business control required
for those popular vehicles
come at a price and will need
to be worked into the con-
flicting trend of fee compres-
sion observed in the industry.
Finally ‘Fund Passporting’
(the EU initiative enabling
asset managers to market and
sell funds across geographic
boundaries without having
the need to establish the fund
in each individual country)
presents huge challenges,
including that of consistent,
multi-lingual and accurate
reporting
Mash Patel ,
Founder and CEO,
Kurtosys n
Dear ISJ
The financial crisis has
diverted much attention from
SEPA. The SEPA credit trans-
fer (SCT) has been around
for a year now and has been
declared a success by most in
the industry. payments and payment-relat-
Although volumes have
been lower than expected
and uptake slower than many
had hoped, much of this
shortfall can be explained by
the dreadful market condi-
tions. The real business of
SEPA got off to a slow start
but momentum is growing.
This year will be regarded as a
landmark year.
All European Union mem-
ber states must comply with
4 To express your views, write to ben@2ipartners.com or write a blog at www.ISJ.tv
the PSD by November. Insti-
tutions that fail to implement
the recommendations of the
PSD will in effect be break-
ing the law. And November
2009 is also the SEPA Direct
Debit (SDD) deadline. Both
of these mandatory projects
are complex, expensive and
ongoing. But the long-term
benefits of SEPA remain un-
altered. As payment markets
are opened to increased com-
petition, customers will enjoy
greater choice of payment
services, from banks and
non-bank payment provid-
ers. Banks are responding
appropriately.
Many leading banks have
already ventured behind the
current body of legislation
to embrace the fundamental
spirit of SEPA. Both banks
and other payment providers
realise that customer focus
and retention are key. The
introduction of the SDD
marks the beginning of SEPA
in earnest for many in the
corporate world. At long last,
it seems, corporates can begin
the process of centralising
ed functions within Europe.
The harmonisation of Euro-
pean payments means that
fewer payment instruments
will be wanted or needed. So,
the arrival of the SDD finally
marks the demise of outmod-
ed payment instruments and
practices. Proof - if anyone
needed it - that the European
payments landscape has
changed for ever. So who are
the mover and shakers?
ISJ Investor Services Journal
The prime movers of
progress in the SDD are likely
to be corporates with a large
business-to-consumer base,
for they stand to benefit the
most. Utilities, telecoms and
insurance companies are
likely to be the first beneficia-
ries of borderless payments
throughout Europe. Many of
these companies already have
a pan-European presence, so
the creation of a true domes-
tic Europe offers significant
savings and benefits.
There can be no doubt that
the realisation of the SEPA vi-
sion will require banks to do
different things. The intro-
duction of new instruments,
such as the SDD, requires
careful planning, investment
and implementation. But it
can also mean doing things
differently. The legislation
may be onerous but it is not
prescriptive: it says what must
be done but not how. Many
banks are finding new ways
to meet their customer needs
and the legislative agenda
simultaneously. One of the
blessings of legislation is that
it affects all equally so there
is merit in banks work-
ing together to build core
compliance and processing
solutions while competing
on the basis of their service
offering. Ironically, the age
of competition is also one of
collaboration.
Paul Taylor,
Managing Director, Europe
Vocalink n
07/05/2009 18:15
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 News and Mandates ISJ Investor Services Journal
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

Custody
BOSTON - State Street
Corporation announced
first-quarter earnings per
common share of USD1.02, a
decline from USD1.35 earn-
ings per share in last year’s
first quarter.
Revenue of USD2.002 bil-
lion had fallen 22.3% from
USD2.577 billion in the
first quarter 2008. Expenses
totalled USD1.304 billion,
down 26.5% from USD1.774
billion compared to the
year-ago first quarter. Return
on common shareholders’
equity was 15.7%, down from
18.7%.
The balance sheet was
USD142 billion at 31st
March, 2009, down from
USD174 billion at 31st
December 2008 and USD154
billion in 31st March 2008.
Tier-1 capital ratio stood at
19.13%, with tier-1 leverage
ratio 10.44%.
Securities finance revenue
was down 40% to USD181
million in the quarter from
USD303 million in the year-
ago first quarter.
Bank chairman and CEO
Ronald E. Logue credited the
new business lines and ex-
pense cutting for the reason-
able performance amid the
wider downturn.
Elsewhere, Erste Group
posted a net profit of EUR232
million for the first quarter
of 2009.
The healthy results in-
cluded a record operating
profit of EUR838.5 million
since the beginning of Janu-
ary – up 10.3% on the first
quarter a year ago and 4.4%
for the fourth quarter 2008.
This was complemented by
strong growth in operat-
ing income – up 5.2% to
EUR1,814.4 million – de-
spite a rise in its expenses,
up by 1.2% to EUR975.9
million from a year ago, and
its risk costs (EUR370 mil-
lion, a 127% increase on a
year ago).
BNP Paribas extended
its relationship with Ash-
ton Advisors by providing
administration and custody
to its three new funds.
The funds were launched
in January into the Austra-
lian fund market in asso-
ciation with Paulson & Co,
headed by manager John
Paulson, and aimed to ex-
tend the Australian boutique
managers’ operations in Asia
Pacific.
NEW YORK - J.P. Morgan
was appointed by Flagstone
Re, the global reinsurance
and insurance company,
to provide global custody,
portfolio accounting and
short-term cash manage-
ment services for their insur-
ance investment assets. Total
assets under custody will
be approximately USD1.3
billion.
Madhu Gayer was ap-
pointed head of Investment
Risk & Analytical Services
for Northern Trust’s asset
servicing clients in the Asia-
Pacific region.
Clearing
BNP Paribas Securities
Services launched clearing
services on the London Stock
Exchange’s International Or-
der Book (IOB), part of the
bank’s Clearsuite® solutions
package which delivers flex-
ible products to any new and
incumbent trading venues.
The proposed merger
between DTCC and LCH.
Clearnet, which aimed to
create a common trans-
atlantic infrastructure for
clearing, is “not proceeding”
according to a statement
from the US institution.
The termination of the
exclusivity arrangement of
the deal in December 2008
by LCH.Clearnet had had an
influence on the decision.
Meanwhile, DTCC is
recommending the introduc-
tion of daily trade netting for
mortgage-backed securi-
ties transactions to further
expand its planned central
counterparty services, cut
the high cost of process-
ing these trades and bring
greater risk protection.
In a white paper recently
published, the company
says that netting all TBA (To
Be Announced) mortgage-
backed security trades daily
- and then having FICC step
in as the counterparty to
each net position - would
reduce costs and risk and
effectively retire the current
clearing model which has
governed how mortgage-
backed securities trade have
been processed for the past
30 years.
GENEVA - SIX Swiss
Exchange launched divi-
dend indices on the SMI®,
SMIM® and SLI®. Dividend
indices serve as underlying
instruments for standardized
products and can be used
by institutional investors to
mitigate dividend risk.
SINGAPORE CITY -
Singapore Exchange Limited
(SGX) set up an Investor Ed-
ucation Fund (IEF) to benefit
investors in its securities and
derivatives market. The IEF
will support initiatives that
seek to improve the under-
standing and ability of inves-
tors to make better informed
investment decisions.
Funds of the IEF come
from money collected
from fines imposed for
rule breaches. The Investor
Education Committee (IEC)
comprises both industry
practitioners and senior
management of SGX.
Fund Administration
AdvisorShares Trust, the
actively-managed exchange
traded fund (ETF) provider,
has selected BNY Mellon
Asset Servicing to service
its funds, including fund
administration, for its multi-
manager and single-manager
strategies.
Participants at the recent
Opalesque Roundtable in
Singapore agreed that Asia is
seeing a new wave of hedge
fund startups. This new breed
of managers has well-thought
and good business plans, as
well as backers in terms of
incubator monies or com-
mitted seed capital between
USD25 million and USD50
million, it was said.
State Street was appointed

1-16 ISJ39_A.indd 6 07/05/2009 18:15

 ISJ Investor Services Journal
by M&G Investments to
provide investment services
for GBP5.8 billion in assets
under administration.
SEI was selected by Global
X Management Company to
provide a turnkey solution to
support the firm’s global ex-
change traded funds (ETFs).
SEI will provide a complete
outsourcing solution that
includes fund administration,
accounting, investor servic-
ing, distribution and autho-
rised participant (AP) pro-
cessing for Global X’s ETFs in
a straight-through electronic
processing environment.
Legal
The SEC charged Aldus
Equity Partners and founding
principal Saul Meyer in con-
nection with an alleged four-
year kickback scheme up to
2007 involving investments in
the New York State Common
Retirement Fund, Albany.
Regulation
The European Commis-
sion’s draft plan for reform
to the regulation of hedge
funds and private equity met
instant opposition from these
sectors. The proposals would
require alternative funds to
seek government authorisa-
tion and meet stringent tests
around governance, reporting
Month Winner Client Location Assignment Mandate size
May JP Morgan
April BNP Paribas
April BNY Mellon AdvisorSharesTrust
April State Street
1-16 ISJ39_A.indd 7
and risk management.
Jörg Rocholl, an associate
professor at the European
School of Management and
Technology in Berlin, said:
“This Directive risks creating
an administrative structure
that will harm the interna-
tional competitiveness of our
system, fails to resolve the
risks that remain, and is inef-
fectively tarring a number of
different industries with the
same regulatory brush.”
OECD Secretary-General
Angel Gurría said a crack-
down on tax havens and
cross-border tax evasion will
help developing countries to
raise more revenues to pay for
schools, roads and hospitals.
In an article published on
the OECD’s website ahead
of the 2009 spring meetings
in Washington of the World
Bank Group and the Inter-
national Monetary Fund, Mr
Gurría said improving the
effectiveness of developing
countries’ tax systems is the
“new frontier” in develop-
ment policy.
Senator the Hon Nick
Sherry, the minister for
superannuation and corpo-
rate law, announced that the
Australian government is
keenly interested in pursuing
a mutual recognition agree-
ment with Singapore open
the way for Australian Man-
Latest mandates
Flagstone Re New York Global Custody USD1.3 billion
Ashton Advisors London Fund Admin/custody n/a
London Fund Administration n/a
M&G Investments London Fund Accounting GBP5.8 billion
aged Investment Schemes to
be offered to investors in Sin-
gapore. The news was backed
by the Investment & Financial
Services Association.
PARIS - Daniel Bouton re-
signed as chairman of Société
Générale, after more than a
decade in the position.
The move drew a line
under his decision to remain
in the position following the
revelation last year of rogue
trader Jerome Kerviel that
cost the bank EUR4.9 billion.
Mr Bouton cited repeated
personal attacks since the
affair.
Securities Lending
Deutsche Bank’s exchange-
traded fund platform, db
x-trackers, passed the EUR20
billion-mark for assets under
management.
The platform has more
than 100 funds that track
stocks, commodities, curren-
cies and private equity among
other sectors. The bank
claims it is the fastest grow-
ing ETF provider, and boasts
the most successful fund, the
db x-trackers II EONIA ETF,
which tracks the Euro over-
night money market rate.
Technology
China Construction Bank
(Asia) Corporation Limited
(CCB (Asia) implemented
News and Mandates
Fiserv’s KRM system for
its 36 branches. The KRM
software provides analytical
and reporting support for
the company’s market risk
strategies.
In ISJ’s Data Services Mar-
ket Guide 2010 the standfirst
for the ‘Are You Exposed?’
article written by John Mryr
of SimCorp should read
‘Seamless processing provides
an accurate, up-to-the-second
view of counterparty risk’.
Fidelity International’s
defined contributions pen-
sions business is the latest
life platform to join the EMX
Message System. EMXCo is
a technology company that
provides an electronic mes-
saging solution for auto-
mating the purchase, sale,
valuation, reconciliation and
reregistration of unitised
funds. Going live via a FIX
connection, this is operated
by FIL Life Insurance Ltd.
The Pricing and Refer-
ence Data of Interactive Data
Corporation, the provider
of financial market data,
analytics and related solu-
tions, introduced the Options
Volatility ServiceSM, which
delivers a relational database
of end-of-day implied vola-
tilities, options risk param-
eters and volatility surfaces
across the US options market
to help clients assess risk. n
07/05/2009 18:15

New Model Banking
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
‘Risk management needs to
get empowered’
In the second in the New Model Banking series, ISJ analyses
SimCorp StrategyLab’s recent research on risk management with the
institute’s director, and gains further market insight
F ew can claim to have as much depth
and breadth of knowledge of the
operations of financial institutions as
Professor Ingo Walter. Currently director
of SimCorp StrategyLab, an indepen-
dent research institution sponsored
by SimCorp that seeks to highlight
important trends in global investment
management, he has advised banks
through market downturns and upturns,
mergers, innovations and financial crisis.
Though today’s financial turmoil is
perhaps unique by the ripple effect on
countries’ economies facilitated by glo-
balisation, it contains familiar questions
concerning the operations of banks,
their attitudes and their hierarchies.
Risk management is the prime ex-
ample. Last month SimCorp StrategyLab
revealed the results of a survey of finan-
cial institutions it commissioned the
Nielsen Group, a global market research
company, to undertake. The ‘Global In-
vestment Management Risk Survey 2009’
gained insight into the status, perception
and use of risk management. In sum, as
Professor Walter describes in the intro-
duction to the survey, many financial
institutions don’t “walk the talk” – be-
lieving one thing and doing another. For
example, 37% of respondents believed
insufficient strategic understanding of
the risk function was a key reason for
large financial losses, yet 75% consid-
ered risk management to make have a
minimal influence on capital allocation
decisions. A mere 12% of respondents
use the results of risk analysis for the
management of “assets and liabilities.”
Unfamiliarity also plays a part in
the industry’s patchy risk operations.
1-16 ISJ39_A.indd 8
ISJ 26
ISJ Investor Services Journal
Around 20% of respondents use in-
ternal systems and applications for the
different forms of risk, though almost
much of the book’s discussion foresaw
the corporate scandals in 2001-2002 as
well as today’s financial train-wreck.
one third admitted they were not fully Published at a time of relative financial
versed in how the applications worked. health, the book’s impact was “extremely
Indeed, 63% indicated that competence limited”. But as the Professor notes,
development and education is critical “when the tide is in, no-one can see the
when it comes to improving the risk rocks hiding just below the surface”.
function. Some would say this comes far The status of risk managers in asset
too late. management institutions also seems set
Professor Walter told ISJ that the diag- to decline, according to the survey.
nosis is three-fold. “The first is regulato- 36% of respondents who claimed the
risk management buck stopped at the
board of directors has declined to 31%
“Somewhere along and this reduction is expect to remain
the line the risk in the future, with the senior manage-
ment level – three down from the board
model or the way it in the biggest institutions, below CEO
and executive management – increasing
was implemented, from 23% to 28%.
had shifted” This is one of the most surprising
findings of the survey. “This is not a case
Professor Walter study, this is a fairly large sample. You’re
moving from the board level to senior
management,
ry failures. The second is failures in the which is exactly
financial architecture. The third missing the wrong way.
link is failures in corporate governance,
because regulation and governance re-
ally substitute for each other.”
The results tell a familiar story, ac-
cording to Professor Walter. In
1997 he co-authored
a book called ‘Street
Smarts’, published by
the Harvard Business
School, which deals with
the corporate governance
of Wall Street firms, and
Professor Ingo Walter
08/05/2009 18:49
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1-16 ISJ39_A.indd 9 07/05/2009 18:15

 New Model Banking
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
Risk managers have to be taken out of
the basement and into the direct line of
fire as far as strategy of the firm and the
tactics and execution are concerned,” he
says.
Risk management can change in just
a short time. Professor Walter sat on the
advisory board for the old Swiss Bank
Corporation before it merged with UBS,
a firm that took “a huge amount of pride
in its risk control processes”. When the
firm merged with UBS, the bank at that
time had lost about USD1 billion in the
collapse of the hedge fund Long Term
Capital Management. That created an
even more intense focus on risk control.
During the boom years between 1999
and 2001 the bank “kept its powder dry”
and was adequately capitalised – and was
building businesses while competitors
were forced to retrench. “So it came as
a huge surprise what happened dur-
ing the current crisis in terms of UBS’s
warehousing of the toxic assets,” he
says. “Somewhere along the line the risk
model or the way it was implemented
had shifted, and the balance between
risk and return became biased towards
the return side. It shows you how fast
that can happen even in well-managed
institutions.”
But the status of the risk manager is
a moot point. Maureen Miskovic, who
stepped down from the board of direc-
tors to senior management level to take
on the role of chief risk officer in 2008,
told ISJ in issue 37 that it is at senior
management level where a real influ-
ence on the operations of a bank is really
wielded.
Professor Walter, when told of this
example, emphasised the importance of
a close relationship between senior man-
agement responsible for risk control and
members of the board – as has been the
case in firms like Goldman Sachs that
have avoided major losses in turbulent
markets without derailing the firm’s core
strategic decisions.
An ongoing problem for institutions,
he notes, is that they continue to operate
in silos. An entire equity operation, from
trading to middle office analytics to back
office reconciliation, often exists entirely
1-16 ISJ39_A.indd 10
separately to its fixed income or deriva-
tives counterparts. Further, the front of-
fice and the middle office are often rela-
tive strangers to each other’s activities.
This point has been reinforced time and
again for the professor in his experience
running training programmes at some
of the largest investment banks.
“I would try to make a point that
maybe you ought to have some cross-
movement of people. In the long term,
lack of such mobility and understanding
“Risk managers
need to be taken out
of the basement and
into the direct line
of fire”
Professor Walter
of other functions probably reinforces
the ‘silo’ mentality and sometimes that
can be fatal, because it impedes the flow
of information and use of best practice.”
Ominously, he found that even the
training is occasionally in silos. “Some-
times in a training programme they
would have separate groups for corpo-
rate finance, capital markets and back
office functions, and they would never
be in the same room together - the cul-
tures would be totally separate.”
Silos between asset classes leads to
silos in the respective risk monitoring.
Neil Beckley, director of Fernbach, the
technology provider, who has extensive
banking experience, explains that it is
partly down to the different develop-
ments of risk areas, from market and
credit risk to operational risk.
Fernbach has developed technology
that attempts to draw together the risk
data from each of the silos so it can be
viewed at a higher level at one time. “We
attempt to bridge those silos with our
applications without actually making a
bank re-engineer its operational silos.
We’re putting a layer above [the silos] to
extract data and perform stress testing
and analysis. That information is then
10
ISJ Investor Services Journal
distributable to senior operational man-
agement, board level - if it’s not the same
people - and the external regulators in
the current environment.”
The survey also showed that the the
regulator is frequently cited as the risk
managers’ adviser.
However, one source thought that this
makes sense in the current environment.
Describing risk managers as wearing “tin
hats – wondering where the next shot is
going to come from [from the regula-
tors]” he added that regulators are often
behind the curve. A recent emphasis by
the regulators on liquidity risk implied
that banks had not been mitigating this
area, when in fact they had – or the best
ones at least.
“Liquidity risk, balance sheet trans-
formation is the crux of the business. It’s
the regulators who haven’t been paying
enough attention,” said the source.
Eliana Boudet of Ineum, an invest-
ment consultant, has extensive experi-
ence in risk management, including
positions at Societe Generale and Credit
Agricole. She told ISJ that there are
two predominant types of banks: those
driven by cost, and those driven by risk.
“It’s very difficult to make a bank that’s
cost-driven culture to do risk as well,”
she says.
On the question as to if risk managers
should take their place at board level,
Boudet said this would be down to the
specific culture of the bank. “It should
be someone with a larger view on the
business itself,” she added. The cohesion
of a bank, regardless of status is perhaps
more important. “The big issue to be
solved is you need to put in place an
organisation and process that enables –
from the bottom up - each senior banker
to talk the same language as the one spo-
ken by the head of the business line and
the one head of the executive committee.
“There are specific methodologies
for equities and derivatives, but when
you talk about management of the bank
as an overview, it [should be] possible
to say: ‘what is my operation/market/
credit risk’? They should be comparable,
where we can say ‘here is more risk than
here’.”n
07/05/2009 18:15
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STEVE FOSTER, Chief Operating Officer, Single Manager Hedge Fund
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DEBORAH FUHR, Managing Director, Barclays Global Investors
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ROBERT KROESE, Principal, GreenBay Asset Management
PAUL MACK, Partner & Chief Operations Officer, Iveagh
KRYSTAN MCSTAY, Managing Director of Capital Markets,
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TOM RAMPULLA, Managing Director Europe, Vanguard
JEAN SCHAEFFER, President, ReFlow Management
ANDREW SHRIMPTON, Member, Kinetic Partners
JERVIS SMITH, Managing Director, Financial institutions Group,
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11

1-16 ISJ39_A.indd 11 07/05/2009 18:15

conf_ad_2009.indd 1 05/05/2009 12:53:43
 Executive Profile
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
A first-rate third party
T. Andrew Smith of Butterfield Fulcrum tells ISJ he is bullish about
alternatives and investors’ appetite for independent administration
T he ability to adapt to change is
one of the few assets with a fixed,
high value in the financial markets. T.
Andrew “Andy” Smith, newly appointed
global head of business development
and marketing at Butterfield Fulcrum,
has repeatedly met the challenge of new
market conditions with new solutions.
His new employers have too. Smith
calls Butterfield Fulcrum a “nimble
business” that can maximise the current
market drive for third-party, indepen-
dent fund administration. In doing so
the firm best serves the innumerable
institutional investors that have held
firm – and even increased – their alloca-
tion to hedge funds, private equity, fund
and funds and real estate.
It is in the alternative asset classes that
the revenues will be generated to resur-
rect a rising market, Smith believes, and
pension and endowment funds - with
their far-sighted strategies - are rightly
keeping the faith.
“I think some of the quickest re-
bounds are going to be in the alternative
space, if they can take advantage of these
depressed markets and the underval-
ued holdings,” he says. “Your long-only
equity trader is one of several million
investors selling stocks. The private
equity people who take a bet on under-
valued illiquid securities will be the ones
who can put return on the table going
forward.”
As institutional investors move “a
little further along the risk curve” - as
Smith calls it - into the alternative space,
there is a sense that they have a power
over the funds’ activities as never before.
Smith is seeing more institutional inves-
tors requiring a full run-down of the
fund manager’s middle- to back office,
demanding the operational and balance
sheet transparency that traditionally has
1-16 ISJ39_A.indd 12
been missing in alternatives.
This plays into the hands of the
administrators who provide such a
window, along with the expertise to un-
derstand even the most complex funds.
“Investors will say, ‘I know the invest-
ment risk but I don’t want any risk with
my manager’,” says Smith. “The indepen-
dent administrator will play a major role
in this space.”
Since the Bernard Madoff scandal,
and the hundreds of Ponzi-type schemes
uncovered since his arrest, investors have
become the watchdogs – there are simply
too few regulators to do it for them.
This has boosted business, and Smith
says that even firms that endeavour to do
much of the administration themselves
still need the aspect of independence
offered from a third party.
Importantly, and perhaps most perti-
nent to this sea-change of accountability,
the fund information obtained by But-
12
ISJ Investor Services Journal
“Investors will
say, ‘I know the
investment risk,
but I don’t want risk
with my manager’...
the independent
administrator can
play a major role in
this space”
terfield Fulcrum goes right back to the
investor. This is all part of the empower-
ment of the pension and endowment
funds, says Smith. “We’re being intro-
duced to our clients’ clients,” he reveals.
“We’re working out what they want and
how they want it. This is unique in the
market place. [The market has] always
focused on the manager and not neces-
sarily the investor behind the manager –
[but it has] become more prevalent.”
Success in doing so is achieved with
comprehensive workflow tools that bring
operational efficiency to the market-
place, he says.
“Butterfield Fulcrum focuses first and
foremost on business processes. As an
outsourcing provider with a high-touch
philosophy, we combine our business
insight and professional service with our
technology tools to address the press-
ing needs of managers and their inves-
tors. I’m bullish about the alternative
investments marketplace, and also about
Butterfield Fulcrum’s opportunities for
growth.”
T. Andrew Smith was born and bred
in New York and went to college in New
England. After two years teaching in a
07/05/2009 18:15
 ISJ Investor Services Journal
high school he settled in Massachusetts
and joined State Street as a portfolio ac-
countant – an “operations background”.
In 1996 he was posted out to Almeida,
California, for a four-year assignment
running the West Coast operation,
working with clients such as CalPERS
and CalSTERS - pension funds now
worth USD175 billion and USD114 bil-
lion respectively today – in an office of
around 60 people.
It was a significant period of growth
for the financial markets and funds, he
says, with him in the middle of it all.
“Institutional investors were starting to
embrace the alternative assets, starting to
understand what market neutral meant.
Large private equity investments, securi-
ties lending, market neutral funds – this
was all happening at the same time. I
had a lot of time to spend with these
investments and markets and see how it
all worked.”
He moved next to Bank of New York,
then a top tier firm as a custodian, but
a mid tier player on plan sponsor space.
His role extended the work from the
West Coast in the public sector, facing
numerous trust companies to empha-
sise the public sector, rather than the
corporate, aspect of the bank – basically
“wherever there was a fiduciary trustee
responsibility”.
He moved to Citi as North American
head of sales, describing himself as “a
lucky operations guy who can tell a
story”, before progressing to the position
of North American head of securities
and fund services at the bank.
After two years, and into the world’s
most globalised financial crisis, Butter-
field Fulcrum caught his eye. The firm
has “amazing growth potential” he says,
with fewer constraints than the institu-
tions that are either looking to contract
or are under the gaze of national regula-
tors and government oversight.
However, he adds, regulation “is an
administrator’s friend”. The more ac-
counting, reconciliation and transpar-
ency demanded of fund management,
the more it suits Butterfield Fulcrum’s
systems and employee knowledge. “We
can play a major role in assisting these
managers: helping them understand
1-16 ISJ39_A.indd 13
Executive Profile
regulation, setting up reporting systems
and providing the required levels of “We’re being
transparency.”
This has developed some interesting
introduced to our
service innovations. Against a tradi- clients’ clients,
tion of ‘lifting out’ certain systems and
employees at the firms they are brought we’re working out
in to administer, Butterfield Fulcrum
experts will be “airlifted” into invest-
what they want and
ment companies to help design the best how they want it”
operational methods to meet regulation
and the service levels demanded by in-
stitutional investors. The initial evalua-
tion – chiefly determining what should
Butterfield
be done by the manager and what by the
independent administrator is between
Fulcrum Group
one and two weeks. Service: Global alternative asset
Once the workflow is identified - administrator
where data transfer happens and where
the risk and control points are - it’s a Clients: More than 900
kind of “plumbing” of the system to
make it more efficient. No two clients are Client type: Hedge funds, funds of
the same, he adds, and occasionally the funds, private equity funds,
temporary experts working for Butter- institutional investment management
field Fulcrum become ongoing residents
in the clients’ firms. Merger: In 2008, Fulcrum Group,
Amid the direct investment hedge backed by 3i, acquired a majority stake
funds and private equity funds that But- in Butterfield Fund Services
terfield analyses, Smith cites an increase
in separately managed accounts Assets: USD80 billion
This is partly down to the institutional
investors’ raised expectations. Before, Headquarters: Bermuda
he says, a pension fund would say to a
fund manager: “I like your style and like
that is still 5,000 securities to analyse,
to be able to be part of your fund” and
and when asset values fall, managers are
you bought in a pro rata share of the
left with the challenge of making up the
strategy.
short fall, encouraging a change of tactic.
“Now, because people are requiring
For this year, Smith maintains that the
thorough independence, they’re saying:
US and Europe will continue to be the
‘I’m willing to put money with you, but
engines of global growth, and specifically
I’m not willing to be part of a pool. I
mentions Luxembourg and Switzerland.
expect transparency and to be able to see
The firm has a close watch on Asia, too,
just my money’.”
and Latin America is showing further
Fund managers comply more often
signs of growth, particularly from Brazil,
than not – as Smith notes, no one is go-
which has benefited recently from
ing to turn down assets under manage-
loosened regulation around investing
ment in this environment. Indeed, Smith
overseas. It gives the company, he says,
has seen hedge funds proactively seeking
“tremendous opportunity”. Smith’s in-
Butterfield Fulcrum’s services, using the
sight into institutional investors, with a
independent administration kite mark
specific focus on alternatives, leaves him
almost as a selling point to future clients.
well-positioned. “Institutional invest-
Challenging market conditions have
ing is here to stay. As the average person
been a spur for change. “The work
starts to accumulate wealth, they will
doesn’t go away when assets drop.” If
look for alternatives.” n
you have 5,000 holdings in your account,
07/05/2009 18:15
 Prime Brokerage ISJ Investor Services Journal
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56

Prime broken
New models and
new mindsets have
changed the
landscape for prime
brokerage. Let the
evolution continue,
writes Anthony
Harrington.

I n the pre crash world, when markets

were booming, hedge funds surged
to USD2 trillion in AUM and the prime
broking community, led by the specialist
prime brokers, Goldman Sachs and
Morgan Stanley, grew symbiotically.
Then Lehman’s folded, liquidity froze
and the model of prime broking that
had seemed to have such potential
basically curled up its toes and died.
The changes that have resulted have
been many and various, and as Alex concern for hedge funds. Second, the
Ehrlich, Global Head of Prime Brokerage
Services at UBS, puts it: “The marbles
“Banks that have old model, which saw prime brokers
able to massively leverage client assets to
are still rolling and anyone who thinks access to central generate funds to lend on to hedge fund
they know what the final shape of the
new model for prime broking is going to banks’ facilities clients, is now impossible to operate. In
the first place, segregation of client assets
be is probably deluding themselves.”
Ehrlich argues that we are currently
now need to comply limits the use of rehypothecation by the
broker. In the second place, there is still
in a period of relative calm, with a huge with the rules laid not sufficient liquidity in the market
amount of analysis and deep thinking
going on at a subterranean level, out of down by the central to enable that kind of leveraged model
to work. This second point, of course,
sight, as various players seek for ways to
position themselves to win market share
banks” could change as and when markets take
on more of a positive tinge, but the
in what everyone agrees will be a very Andrea Angelone segregation point looks to be settling in
different world.
There are at least two huge factors JP Morgan as a permanent feature of the landscape.
Roy Martins, Head of International
that everyone agrees on as determining Prime Services at Credit Suisse argues
characteristic of the new dispensation. fully paid for assets of some Lehman that this new landscape plays extremely
First, with Lehman administrator hedge fund clients, segregation of fully well to well-capitalised banks. “The
PricewaterhouseCoopers (PWC) paid for client assets from the fund’s bank model has proved successful in
refusing as yet to release both cash and prime broker assets is now a huge this space. We were also very selective

14

1-16 ISJ39_A.indd 14 07/05/2009 18:15

 ISJ Investor Services Journal
about the hedge funds we took on as
clients and that strategy has worked
well. These funds are well positioned as
investors look to recycle cash back into
alternatives,” Martins says.
Credit Suisse continues to see
significant flows of new business
and now sits on a par in Europe with
Goldman Sachs and ahead of Morgan
Stanley – a significant change from
before the crash. “If you look at the latest
surveys, last year we had four times less
client assets than the number one PB.
Now we are on a par, which shows our
positive momentum” he comments.
For Martins, the secret is the ability to
give hedge funds the kind of in-depth
funding that only a bank can provide.
“Today there are no real broker-dealers
left. That model relied to an extent on
using client cash to fund the business.”
The way forward suggests that well-
capitalised banks will succeed.
Going forward, he suggests, the debate
will also be focused on the value-added
that the bank can provide to its hedge
fund clients. “There are two over-riding
concerns here for hedge funds. One
is the quality of capital available to
them. The second is securities lending/
synthetics,” he says.
Martins points out that key industry
surveys put Credit Suisse at the head
of the pack on this issue. “If you look
at securities lending or swaps, we rank
number one. These are the strengths that
attract the big hedge funds,” he says.
Martins says that Credit Suisse
recognises that post-Lehmans many
of the larger hedge funds are going to
want to implement a multiple prime
broker, multi-asset class strategy. To
facilitate this Credit Suisse has what
it terms “advanced prime services”. A
strong element, he says, is its operating
platform, which is highly scalable in
terms of asset classes and products, with
a strong futures capability.
Additionally, securities lending
continues to be a key part of a prime
broker’s revenue stream, with margin
lending being the other big revenue
driver. “With synthetic products,
execution flow goes with the financing
1-16 ISJ39_A.indd 15
Prime Brokerage
provider so you need a very strong
execution team,” he comments.
Andrea Angelone, Global Co-head
of Prime Brokerage at JP Morgan,
points out that HMT is currently
circulating a paper (‘Investment Bank
Insolvency Arrangements; A Discussion
Paper’) for discussion among the
financial community with the aim of
understanding, among other things,
why “the UK insolvency regime applied
in the Lehman Brothers International
Europe failure did not allow the return
of cash and fully paid up assets to
clients”.
There is general acceptance that the
US model is much better at ensuring “Institutional
segregation of client assets in a way that
prevents the liquidator from holding
investors want
on to those assets in the event of the PB hedge fund, or
defaulting. “Some of the key differences
in the US model over the UK model absolute return,
have to do with the fact that the US
model tends to prioritize the customers
exposure”
in a liquidation of a broker dealer David Aldrich,
even if it limits the re-hypothecation
rights or imposes stricter segregation BNY Mellon
requirements of customer accounts,” he
explains. banking. “The banks may have a certain
The next stage in this discussion, amount of liquidity to offer to the right
after the Treasury has absorbed the customers now, but there are a lot of
industry feedback, will be a consultation other things going on, including bad
document. “What is clear is that the assets on bank balance sheets and the
administrators are required to distribute de-leverage of them. What is clear is
client assets promptly, but they have to that banks that have access to the central
go into the full complexity of the cross banks facilities now need to comply with
liens in the various Lehman subsidiaries. the rules laid down by the central banks,
What we are seeing coming out of the including the need to be within defined
present discussion is a requirement regulatory risk capital ratios” he says.
for more transparency and more up to That of itself suggests a different kind of
date information about identification prime broker model, one that is going to
of client assets, assets re-hypothecation, be a lot more cautious than the old, now
assets used as collateral, client money defunct, model.
held by affiliates, and close out There are other issues for the prime
procedures” he says. brokerage community, he suggests, not
Angelone points out that although the least of them being that the kinds of
major banks with an interest in prime investment models that are likely to
broking are now jocking to gain market work over the next year or so do not play
share on the basis of both providing well for PB revenue streams. “We expect
safe custody for client assets, and on the the distressed fund strategy to see a lot
back of their ability to provide at least of play. There is a great deal of investor
a modicum of liquidity to some hedge interest in this area, but distressed
fund clients, there is as yet no clear funds do not need leverage. It is a pure
leadership on the future of investment investment play and as such there is not
15
07/05/2009 18:15
 Prime Brokerage
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56
“Anyone who thinks
they know what
the final shape for
the new model for
prime brokerage
is going to be is
probably deluding
themselves”
Alex Ehrlich, UBS
much for a prime broker to do for the
client,” he notes.
Further, the balance of power has
tended to shift from hedge fund
managers to investors and many larger
investors are now pushing hedge funds
to provide them with segregated,
managed accounts. The advantage for
the user is that it means that if they
want to redeem their money, there are
no other investors in the queue before
them. From the manager’s point of view,
however, it means a lot more investor
communication and possible investor
interference in the fund’s investment
strategy.
Moreover, as Angelone explains, the
access to leverage via the hedge funds’
prime broker is limited. “The segregated
managed accounts approach (as stand
alone legal entities) imposes limitations
because you can not pool the accounts
for leveraged purposes. Moreover, it is
the investor, in specific types of managed
accounts, that owns the fund assets, not
the hedge fund, and that too imposes
restrictions on the hedge fund manager
when it comes to running its strategy ,”
he points out.
The hedge fund/prime broker
relationship today is also affected by
the way some hedge fund managers
are using the Ucits III framework. The
idea is that investors feel safer with the
Ucits framework and the Ucits market,
after all, is worth some USD5.3 trillion,
around five times the size of the reduced
2009 hedge fund market.
1-16 ISJ39_A.indd 16
“From the prime broker point of
view, the structure has a lot of parallels
to custody-plus-prime-broker-type of
arrangement, so prime brokers can have
a role in this space. However, Ucits does
not allow re-hypothecation, and there
is limited scope for leverage as well as
very limited scope for short selling (only
via synthetics), both of which limit the
appeal of the Ucits structure for prime
brokers,” he comments. Prime brokers
want the relationship with the larger
hedge funds that are setting out to win
big institutional Ucits mandates, but
they’d appreciate those hedge funds to
also win more traditional hedge fund
leveraged long short mandates.
UBS’s Ehrlich says that the overriding
factor in the current hedge fund/
prime broker relationship has to do
with counterparty risk. “A year or two
ago people thought that the financing
component of the prime broker service
was the commodity part. Now the only
thing that matters is counter-party
credit worthiness,” he comments. The
ability of banks to be the primary
financing counterparties in a hedge
fund environment of growth and
leverage remains slight, so that kind of
environment is being stifled at present.
“We may have retreated 25 % from the
precipice that the major banks were
staring over six months ago, but that
doesn’t mean that anyone can say that
liquidity is not a problem any more. I
expect this to create an environment in
which alternative financing mechanisms
will take root,” he says. The share of
financing that belonged unreservedly
to PBs two years ago can only go down,
going forward.
David Aldrich, Managing Director,
Alternative Investment Services at Bank
of New York Mellon says that BNY
Mellon did a survey recently which
showed that the industry expects hedge
funds to shrink from around USD2.3
trillion in 2007 to just over USD1 trillion
in 2009, but that the expectation is that
new money flowing into funds will push
it past the 2007/2008 high water mark
by 2013.
“The bottom line is that institutional
16
ISJ Investor Services Journal
investors want hedge fund, or absolute
return, exposure and they are going to
increase their mandates to the sector.
So prime brokers are going to be setting
out their stall to win that business,” he
says. Aldrich too, believes that the new
winners in this space will be the big
banks, who are best placed to provide
credit and securities lending. However,
BNY Mellon believes that having turned
themselves into banks in their turn, the
big broker dealers, particularly the prime
brokerage giants, Goldman Sachs and
Morgan Stanley, will come back fighting
for market share very aggressively.
He points out that BNY Mellon
services both hedge funds and prime
brokers. “When we work with prime
brokerss now, we are working with them
to help them redesign the structure of
prime brokerage, with the main change
being the need to create segregation
of client assets,” he comments.” BNY
Mellon also acts as an intermediary
for the investment banks and their
hedge fund clients in two key areas,
“Margin Direct”, which is the servicing
of the independent amounts for ISDA
CSAs to reduce counterparty risk, and
triparty collateral management, which
is the collateralisation of the financing
relationship between the parties to cover
any net exposure.
The custody and collateral
management of prime brokers’ assets
reinforces the roles of the custodians
and international central securities
depositaries, as Frank Reiss Director at
Euroclear and Head of Equities Product
Management, recognises that the
segregation of assets is key to protecting
investor rights. And the use of triparty
agents, such as Euroclear, is an excellent
way to ensure the proper segregation
and monitoring of the assets under
custody.
“Prime brokers are looking for ways
of monitoring the assets they have under
management much more closely, and
in talking to us, they realise that they
can very easily partition off proprietary
assets from clients’ assets and keep these
assets in a fully secure environment,”
he says. n
07/05/2009 18:15
17-25 ISJ39_A.indd 17 07/05/2009 17:45
 Custody
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
Sub continent
sub custody
India has weathered the worst of the
economic downturn, and investor
services growth for local and foreign
players alike is increasing,writes
Ben Roberts
T he growth of India’s financial
market has been one of the most
successful PR campaigns in the last
decade. Among its BRIC peers, the
sub-continent has been largely free
of the wider political baggage of
China and Russia and arguably boasts
more diverse sources of revenues
and growth than Brazil – particularly
as a destination for business and IT
outsourcing.
Manmohan Singh, India’s prime
minister, even told the Financial
Times at the end of March that a
democracy such as India was better
placed for a sustainable economic
reform than its one-party neighbour
China.
The country is currently in the
middle of voting in a new parliament,
a multi-stage process that began on
16th April.
Inflows into the market have
declined in the last eighteen months
- in line with wider reductions in
cross-border funding - as financial
institutions look inward to their
home country in the wake of new
legislation.
The foreign investment that has
arrived has remained largely one-way
traffic: only the mutual fund industry
can boast any notable overseas invest-
ment. The fund management indus-
try, for example, has a collective limit
17-25 ISJ39_A.indd 18
of USD7 billion that can land on foreign
shores – some estimate that only around
USD2 billion has been used. Further, a
fund’s management must be home-grown,
as opposed to offshore-based operations.
Chong Jin Leow, head of Asia at BNY
Mellon Asset Servicing, points out that this
ruling has been the catalyst for the growth
in joint venture partnerships with foreign
firms. “The joint partner would be forming
with a local partner is so they can bring in
“We’re actively
looking at
opportunities
because it’s
definitely an area of
growth”
Chong Jin Leow,
BNY Mellon
the offshore expertise to manage the over-
seas mutual funds,” he says.
Instead, India can be defined as a nation
of savers, with a high proportion of domes-
tic investment. It has left the country with
significant reserves but a limited global
footprint.
This trend was highlighted by the Or-
ganisation for Economic Co-Operation
18
ISJ Investor Services Journal
and Development in its Interim Report
for the country. Falling exports were set
to offset the expansion in domestic de-
mand, it forecasted, and were the prin-
cipal cause of the weakened economic
growth at the end of 2008. Real GDP
growth was set to fall to 4.3 this year,
down from 6.0 in 2008, with a return to
5.8 expected for 2010.
But the country remains a competitive
arena in securities services, and in the
first few years of this decade, new oppor-
tunities in the custody space have arisen.
Sub custodians in particular – with
HSBC and Citi out in front - have seen
a growth in business with more global
custodians seeking their services. The
mutual funds industry is the dominant
source of revenue for such banks com-
pared with pension funds and insurance
funds, though all three cash pools have
seen significant changes in the last few
years, brought about by regulation, an
evolving market view, and the global
financial crisis.
Debopama Sen, managing director,
India Securities Country Manager, SFS
at Citi, estimates that the assets under
management had grown in the past
seven years from around USD25 billion
to USD150 billion. Since the financial
downturn this has declined significantly,
she says, though this should not dampen
expectation.
With a pension fund industry still in
07/05/2009 17:45
 ISJ Investor Services Journal
You can find this article and others at www.ISJ.TV.
its infancy, she has seen more Indians
moving money from banks and postal
savings schemes into mutual funds.
“We believe that in India, with its high
savings rates of 35% and a very active
and highly educated savers’ base, the
mutual funds industry can only grow. A
key area is integrating fund administra-
tion – primarily fund accounting - for
these mutual funds. Approximately 22 of
these funds are looking at outsourcing
their accounting capability - we already
service six of them and are looking to
extend that.”
Wealth managers and private banker
have gradually become another segment
of revenue. These players must obtain a
portfolio management license from the
local regulators to structure customer-
specific portfolios and earn performance
fees. Under the mutual funds structure,
she explains, you can only charge a fixed
fee. “It’s a very interesting space for us –
not only does it combine classic custody
and accounting capabilities but also
AD - Investment
Education
17-25 ISJ39_A.indd 19
plays into operations in the US where we
have a very strong separately managed
accounts base.”
The financial crisis has knocked the
confidence of the retail investor, she
adds, and many savers may wait on the
sidelines until the turmoil subsides. But
declining bank returns might change
their mind. “Ten years ago, the average
saver used to earn 14% from their bank
deposits – they now earn less than 5%,”
she says. “So there’s a natural progres-
sion towards looking at other assets with
higher return.”
India’s retirement savings is a complex,
multi-scheme matrix, with new systems
overlapping old. The country has three
distinct pension schemes. The longest
running is the Employee Provident Fund
scheme, whereby funds are placed with
the government body. However, compa-
nies with more than 20 employees can
apply for the registration of their own
fund under the vehicle and manage their
own fund.
19
Custody
The second is a new scheme controlled
by fund managers. The third pool of
pension funds contains those launched
by insurance schemes with unit-linked
plans making up the biggest segment.
The EPV government scheme is the
only compulsory scheme. Historically,
private institutions would offer pensions
by buying it from insurance companies.
In fact, the insurance regulator had over-
seeing the development of the pension
sector until 2003, when the Indian gov-
ernment established the Pension Fund
Regulatory Development Authority “to
find sustainable solutions to the problem
of providing adequate retirement in-
come”. At the same time the government
of India moved from a defined benefit
to a defined contribution based pen-
sion system, making it mandatory for its
new recruits (except armed forces) since
1st January, 2004. These schemes are
directed in local securities and mostly in
government and fixed incomes securi-
ties, with only 5% permitted for equities.
07/05/2009 17:45

Custody
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
Since 1st April, 2008, the pension
contributions of central government
employees covered by the New Pension
System (NPS) are invested by profes-
sional pension fund managers in line
with investment guidelines of govern-
ment, applicable to non-Government
Provident Funds.
The Ministry of Finance
regulates the banking and trading sec-
tors, and compared to Western markets
maintains tight control. Similarly, the
Securities and Exchange Board India
(SEBI) has allowed short selling for
over a year now, though each securi-
Source: Reserve Bank of India.
ties lending transaction is settled over
seven days. Prime minister Singh even
acknowledged that the country’s system
was “slow to move”.
But Debopama Sen at Citi points out
that the relative bill of health in the
wider economy in the last 18 months
has vindicated such controls. “Indian
regulators feel that the stance they’ve
taken over the last few decades on de-
velopment of the local financial sector
has done well,” she says. “Apart from
equity price value coming down, gener-
ally in terms of risk management, the
banks have come out well. So there is a
reinforcement of the Indian regulator’s
view.”
Insurance funds are restricted to do-
mestic investment, though Sen adds that
there is little appetite to invest overseas
in any case.
Kapil Seth, head of HSBC Securi-
ties Services, India, is positive on the
receptiveness of the regulator to modify
rules, and describes it as “pro-investor”.
In particular, he says, the regulator has
endeavoured through working groups
to simplify the requirements of foreign
institutions looking to register in the
country. Currently, he explains, a foreign retirement “While it is a long term effort,
institution needs a whole series of dif-
ferent codes, such as for income tax and
clearing. He reveals that a single code
has been high on clients’ wish lists in
recent conversations. “I think the process the average Indian worker doesn’t have
has improved a lot but this is an area
where our clients would like to see some
improvement. The other area where
the regulator has responded has been
17-25 ISJ39_A.indd 20
KR2213
Wholesale price inflation Inflation has moderated markedly at the wholesale price level, to
has come down under 1% by March. Much of this decline is due to lower commodity
prices, which carry a high weight in this index. Consumer price
ISJ |ISJ Investor
Investor Services
Services Journal
Journal
India
Year over year growth rate % pension.”
14 Seth explains that the sub-custody
service has been the “bulk” of business
12 recently. “Talking to our clients, we see
10 that the appetite for India remains.
However, given the fact that the risk A
8 appetite overall has reduced, there may
be some concern. On the whole, the ap-
6
petite to get registered with the regula-
4 tors continues, there is still reasonable
demand.” Risk has become a prominent
2
subject in discussion with the domestic
0 clients, particularly in the fund man-
2005 2006 2007 2008 agement firms, he adds. “The relative
Source: Reserve Bank of India risk rating of various people have been
changing and that has added questions
and a lot more scrutiny in discussion at
each level with fund houses,” he says.
But a return of risk appetite – along
“Indian regulators with a widening of asset classes and the
98 efficiency in trading - will be cru-
feel that the stance better
cial to India’s continued emergence, he
they have taken adds. “I think the Indian market needs
the return of risk appetite, but within
over the last few the marketsther needs new investment
decades on the classes - credit derivatives, interest rate
futures – and greater STP (straight
development of through processing). The STP rate for
the local financial foreign investors remains satisfactory
– it’s in the domestic market where the
sector has done STP levels are much lower. The levels
well”
in the domestic market are something
everyone looks to improve.”
Debopama Sen, Chong Jin Leow at BNY Mellon Asset
Servicing says that despite the current
Citi low level of fund management invest-
ment overall flowing overseas, the
increasing its limit in investing in debt. growth story in the last few years means
That has increased significantly – now potential opportunities remain. “We’re
it’s USD15 billion.” actively looking at opportunities because
Debopama Sen says that the next it’s definitely an area of growth,” he says.
stage of regulation would be to give the Sen at Citi agrees, and cites some of
pension sector “a little push” to continue the local fund houses have launching
the progress that will ensure a nation’s outflow schemes that will invest overseas
following regulatory approval.
any sort of help [the pension sector] “We are working with a number of
can get in political help to push it will them to establish a global custody rela-
benefit the market. It’s also important tionship. Not only do we have a strong
for a wider investor perspective because onshore franchise, we’re the only ones
with the pro global network to provide
a pension scheme. Currently there is a them with the same consistency of ser-
huge overweight in the population that vice everywhere in the world but also a
is earning, so about 30 years down the strong local window.” n
line there will be people retiring with no
20
07/05/2009 17:46
KR2213ISJAD:LatAm A3 09 27/4/09 10:09 Page 1

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Analyse This
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
Analyse This: Central
and Eastern Europe
business
S
ince 2002
the fund
in CEE has
been growing
twice as fast
as the overall
European
industry. As European investment fund
assets grew by almost EUR400 billion
to reach EUR7,925 billion in 2007, with
annual growth rates of 13% over the last
few years, the CEE fund market reached
EUR34.6 billion in 2007, a 32% growth
rate more than double the overall
continental market.
But since end of 2007 the region has
been feeling the effects of the financial
crisis. The downward trend continued
in 2008, with the total UCITS market
falling to EUR4.593 billion at end of
June 2008 which means a decrease
of 22%. Net outflow of UCITS assets
recorded to EUR 335 billion or 6% of
UCITS assets at end of 2007.
Is the development of fund industry
in CEE slowing down after the record
growth rates of recent years, or are
growth prospects still promising?
GDP growth drives AUM
There is a clear relationship between
GDP growth and the growth of assets
under management (AUM) in the
fund industry. This is reflected by the
development of the fund industry in
Spain. The country saw steady GDP
growth from the mid eighties to the mid
1990s, and, with some time lapse, the
asset base in the Spanish fund industry
grew significantly stronger than GDP.
The real boost came when GDP/Capita
reached about EUR10,000. AuM in
Spain grew from EUR7 billion in 1990 to
EUR70 billion in 1994.
Even when GDP/Capita slowed down,
for some two to three years, the inflow of
17-25 ISJ39_A.indd 22
assets continued strongly. At the end of
1997, AUM in the Spanish fund industry
had reached EUR161 billion.
Based on the development of Spain,
the potential in CEE is outstanding.
The open question is: When will
the fund business pick up again? The
latest forecast for the region shows a
weakening of the GDP growth in 2009
but in 2010 the region will make the
first steps to growth. Assessing when the
sentiment in the fund industry is going
to change is currently difficult, but first
tentative signs emerged in April 2009. So
the gold-rush times are still ahead of us.
Retail banking market - another
driver
Financial groups active in CEE have
been another major factor in driving
growth. The intermediation of the
banking system in the CEE countries
is still lagging behind Western Europe.
Therefore some financial groups have
built their business model with a
strong focus on this growing region.
The retail banking market is especially
underdeveloped in comparison to
Western Europe, taking into account
some studies which show the usage of
banking products and services or loan
-to-GDP ratio, deposit-to-GDP ratio
(for example, while the average Austrian
has borrowed in average EUR46,000, the
average Czech borrowed just EUR6,000).
The development and growth of
the banking industry tends to follow
a similar path: first having savings
accounts and payment transfers and
then current accounts, credit cards and
the financing of personal needs. The
last wave is wealth management. Studies
show that the fourth wave begins when
GDP/Capita hits a level of around
EUR10,000.
This development takes some time,
but what we have seen in the CEE
22
O
ISJ Investor Services Journal
W
k
a
Gunther Mandl, head
of Strategy, Finance
& Subsidiaries
at Erste Asset
Management
countries is that the development of
banking services is progressing at a faster
pace. This is due to the fact that the big
regional players gained experience when
they first moved into the region, for
example in Czech Republic or Slovakia,
which benefits them as they move into
other markets. The financial system
itself in each respective country is also
benefiting from that.
The retail sector in particular is
catching up. This is also true for the
asset management business. The share
of retail investors in Western Europe is
approximately 48%, whereas the retail
share of AUM in CEE is approximately
77%. But the typical retail investor
still invests his savings in low risk asset
classes, mainly deposits.
It is not surprising that the
penetration of funds as investment
vehicles is very low. The Funds/Capita
ratio in the CEE countries was in the
range of EUR900 to EUR1,200 at the
end of 2007 (for example, while an
average Austrian has invested around
EUR20,000 on average, a Hungarian has
only EUR1,000 in investments).
The demand for long term
investments will grow in line with
personal wealth, creating enormous
potential for the fund industry. The
majority of employed people are forced
to think about their personal pension
schemes, or even have to build them up.
This also creates awareness of portfolio
solutions and personal financial
planning. We see that both wealthy
private individuals and small investors
will start to put part of their savings into
fund products. Further, key players in
the financial sector are focusing on the
distribution of such products and also
on creating more “tailor made” products.
For the fund industry in CEE, the best is
yet to come. n
w
07/05/2009 17:46 Custody
 Our many years of experience and our high technical standards provide a firm foundation for your securities businesses.
With a great deal of flexibility, we fulfill your own particular needs and also look after special wishes. If you want to
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www.erstegroup.com 23

CustodyBaby_203x267abf_ISJ
17-25 ISJ39_A.indd 23 GSL Mag.indd 1 05.05.2009 13:27:5517:46
07/05/2009 Uhr
 Statistics ISJ | ISJ Investor
Investor Services
Services Journal
Journal
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

Astec AnAlytics

Loan spreads indicative of unique risks in cash-based Lending programs Statistically

by andrew shinn, cfa

Lenders in the U.S. have traditionally

speaking As we now know all too well, the credit
insisted on receiving cash collateral Loan spreads are indicative of unique risks
crisis drove down the prices of collateral
while European and Asian lenders have reinvestments, boosting yields as seen in
preferred to receive non-cash. The in cash based lending programs, writes
Figure 2. With higher yields, cash-based
difference in lending styles was mainly
a matter of academic debate before the
Andrew Shinn, CFA, SunGard loan spreads increased. Fees, however,
didn’t increase along with spreads when
credit crisis. New data from SunGard the credit crisis accelerated in August
L enders in the US have traditionally
Astec Analytics demonstrate the real
insisted on receiving cash collateral
differences
while Europeanin the
andrisk-return profiles
Asian lenders
began to take on more risk in return
for additional yield on the reinvestment
have of side. In order to earn higher yields,
securities, most lenders did not invest
’07. The non-cash fee displayed the “true”
in those now-depressed assets. Most
borrowing
reinvestmentcost,assets
while were
cash marked
loan spreads
down
each lending
preferred method.
to receive non-cash. The lenders went further out on the yield were inflated due to markdowns
because of reduced liquidity. Since in
difference in lending styles was mainly curve andDATA
purchased lower-quality collateral reinvestments.
NEW FrOM SUNGArD debt the assets in question continue to have
As seen in Figure 1, before
a matter of academic debate before the the credit instruments, a move that some lenders relatively strong credit, if lenders are able
ASTEC ANALyTICS
crisis, crisis.
credit cash-based loanfrom
New data spreads closely
SunGard now regret. Despite
to holdthe themnewspaper headlines
to maturity, aboutbe
they should
DEMONSTrATE ThE rEAL
tracked
Astec fees from
Analytics non-cash the
demonstrate lending.
real As we now know all too well, the themade
few securities
whole. lending programs that
DIFFErENCES IN ThE rISk-
Cash-basedinlenders
differences have traditionally
the risk-return profiles of credit crisis drove down the prices of invested
We inwillmortgage-backed
undoubtedly see the securities,
average
rETUrN prOFILES OF EACh
each lending
invested theirmethod.
collateral into short-term collateral reinvestments, boosting yields most cash-based
lenders didloannot
spread converge
invest in thosewith
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LENDING METhOD.
As seen
assets withinstrong
Figure credit
1, before the credit
ratings so as seen in Figure 2. With higher yields, depressednon-cashassets.
fees again
Most over the next couple
reinvestment
crisis, cash-based
they could quicklyloan spreads
adjust closely in cash-based loan spreads increased.
to changes of years.
assets were Once
markedthedown
liquidity-constrained
because of
tracked fees from non-cash lending. Fees,
interest rates. Arbitrage between cash/non-cash lending however, didn’t increase
reduced liquidity. Since the assets in questionlenders’
along reinvest assets are off the continue books,
to
Cash-based lenders have traditionally
programs ensured that fees were similar. with spreads when thehave relatively strong credit, if lenders are able to hold will
credit crisis it remains to be seen what changes them
invested their collateral into short-term accelerated in August ’07. The non-they should
to maturity, be made
be madeto the cash-based model. n
whole.
assets with strong credit ratings so cash
Something changed several years ago, however, as cash-
fee displayed the “true” borrowing
they could quickly adjust to changes in cost, while cash loan spreads were Astec Analytics is a leading provider
based lenders began to take on more risk in return for We will undoubtedly see the average cash-based loan
interest rates. Arbitrage between cash/ inflated due to markdowns in collateral of transparency and reporting for
additional yield on the reinvestment side. In order to earn spread converge with non-cash fees again over the next
non-cash lending programs ensured that reinvestments. securities lending professionals. For more
higher yields, lenders went further out on the yield curve couple of years. Once the liquidity-constrained reinvest
fees were similar. Despite the newspaper headlines about information, visit www.sungard.com/
and purchased
Something lower-quality
changed debt instruments,
several years a move
the few assets
that lending
securities are off the lenders’
programs books, it remains to be seen what
securitiesfinance
some lenders now regret.
ago, however, as cash-based lenders changes
that invested in mortgage-backed will be made to the cash-based model.

Figure 1: Cash-based loan spreads diverge from non-cash fees Figure 2: Yield on cash reinvestments rises during credit crisis

3% 6%

5%
Source SunGard Astec Analytics

Source SunGard Astec Analytics

2%
4%
2% 3%

1% 2%

1%
1%
0%
0% -1%
J-00 F-00 M-00 A-00 M-00 J-00 J-00 A-00 S-00 O-00 N-00 D-00 J-01 M-01 A-01 M-01 J-01 J-01 A-01 N-06 F-07 M-07 A-07 N-07 F-08 M-08 A-08 N-08 F-09

Spread on USD Cash Lending Non-cash Fee Average Collateral Yield Fed Funds Target Average Rebate Rate

24
Astec Analytics, a leading provider of transparency and reporting for securities lending professionals.
For more information, visit www.sungard.com/securitiesfinance
17-25 ISJ39_A.indd 24 07/05/2009 17:46

© 2009 SunGard.
 AD - SEB

17-25 ISJ39_A.indd 25 07/05/2009 17:46

 Custody
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
Our friends in the North
The difficult wider market conditions have not diminished
the Nordic custody market’s reputation for good handling and
innovation, writes Hardeep Dhillon.
T he Nordic securities services
market is witnessing greater
activity, as custody and securities
lending businesses start to pick up and
infrastructure changes advance greater
harmonisation of the region’s markets.
Local custodians have had to contend
with a drop in the value of assets they
hold and also a fall in activity levels since
the global financial crisis. The number
of transactions fell in the last quarter of
2008 and the start of this year but recent
trends suggest demand is returning.
“From a custody perspective,
transaction volumes fell after peaking in
October and it was uncertain how the
market would start at the beginning of
this year. But we are now back to 2008
levels and things are continuing in a
more favourable direction,” says a trader
at a Danish bank.
Untitled-2.indd 26
ISJ Investor Services Journal
“Clients have Though clients’ needs to borrow and
lend securities or cover short positions
restricted budgets have remained unchanged, the increase
in the cost of collateral is adding costs
and are investing to their custody and securities lending
more in mainstream activities, says a head of product
development.
instruments such “Clients have restricted budgets
and are investing more in mainstream
as large cap stocks instruments such as large cap stocks and
and bonds and fixed bonds and fixed income issued by the
state,” he says.
income” A ban of short selling has also
curtailed activity and though this has
“We are still in an uncertain period now been lifted for most of the region,
and it is difficult to forecast how the year it is still in place for Norway. Securities
will develop right now,” says a Danish lending has also experienced a big dip
trade association official. “Nonetheless after the closure of many hedge funds,
there has been a little bit of a pickup in which were natural investors in stock
business in the last couple of months and loans, adds a head of trading at a Danish
hopefully we have seen the bottom. bank. “Investment banks are looking
26
n
8/5/09 18:31:21 32551_C
 Nordea Bank
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nordea.com 27
Making it possible

26-39 ISJ39_A.indd 27
32551_Custody_203x267.indd 1 07/05/2009
21.4.2009 18:16
12:27:47
 Custody ISJ Investor Services Journal
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

“It will take some to limit some of their outstandings and

time before the
market regains the
old levels as much of
the customer base
has gone”
Market
FactFile: Nordea
Mission: Nordea provides
high quality, tailor-made custody
services for local and foreign
investors dealing with Nordic,
Baltic or global securities.
Method: Through our Nordic Rela-
tions Concept we offer one point of
entry to Nordea’s custody services
covering the Nordic countries and
Baltic Sea region. The client is ap-
pointed a dedicated Nordic Client
Relations Manager, who co-ordinates
the Nordic client relations team
designed to serve the client. This en-
ables the client to efficiently manage
the Nordic relationship.
Presence: Nordea has a strong and
active presence in all four Nordic
markets: Denmark, Finland, Norway
and Sweden.
risk and so a lot of securities lending has
been drawn back to bring lines down
internally,” he adds.
He notes that activity picked up
slightly over the dividend period in
April, which is a normal occurrence, and
that some confidence is returning to the
market. Some institutional investors still
need to invest and due to current low
interest rates he sees equities becoming
more favourable, particularly large cap
stocks which have the necessary volume
to easily enter and exit positions. There
are also many short-term investors
playing the market as it moves up and
down due to the continuing volatility.
“Volumes are at low levels and nothing
near what we had before. It will take
some time before the market regains the
old levels as much of the customer base
has gone,” he says.
The Swedish market has operated
quite well during the crisis, though
there was a period when many foreign
investors, particularly US clients, moved
investment back to their domestic
markets. Recent statistics and anecdotal
evidence suggests foreign investors are
returning to Sweden and also other
Nordic markets, says a Swedish trade
association official.
Banks in the Nordic region do have
concerns over their exposure to the
Baltic region, like Swedbank and SEB,
and Eastern Europe and many are now
focussing on their core businesses and
key strengths.
“Though we do have a small Baltic
business, we will continue our strategy
to be very strong on a Nordic level and
locally in our four main markets of
Norway, Sweden, Finland and Denmark.
We will keep continue to focus on our
clients’ needs and requirements, which
has proven a successful strategy,” says the
head of product development.
The head of trading adds that some
brokers have closed down their securities
lending businesses, for example in
Sweden, because they did not have the
same access to capital as before the crisis.
“Access to liquidity is limited and it has
become increasingly difficult for firms
to carry on the business without having
the finance to lend out money and take
stocks as security,” he says.
The Danish bureaucrat notes that
only a handful of banks offer the full
custody lending concept to customers in
the Danish market and he expects this
will continue at least while there is still
uncertainty in the market.
Danske Bank was one of the first to
enter securities lending in Denmark
and as the market is predominantly
repo agreements and share buybacks,
there are not many banks that have the
systems to facilitate and book stock
lending correctly.
Danske will open a new stock-lending
desk in Stockholm later this year, while
the bank has also hired another person
to its desk in Denmark.
The head of product development
notes that though transaction volumes
fell between September and March
this year, the Nordic region has not
lost volumes to any of the multilateral
trading facilities (MTF). “Chi-X could
have probably taken more market share
from possibly the LSE but there has been
no impact so far on the Nordic market,”
he says.
The MTFs are adding a bit of liquidity
but not much to the Nordic market yet,
adds the head of trading. More volume
in certain large Finnish and Swedish
stocks is originating from MTFs, which
he believes is new interest coming from
market makers who have to hedge their
positions either short or long.
Though the MTFs have yet to take
market share out of the Nordic region,
May’s launch of Burgundy could have an
impact on the market, adds the head of
trading. “Some of the biggest houses in
the Nordic region own Burgundy and it
has the potential to manage and move a
lot of volume,” he says.
Burgundy is owned by a consortium of
12 Nordic banks and securities trading
firms that represents almost half of the
Nordic trading volume. Full launch
and trading in 115 Danish, Finnish,
Norwegian and Swedish stocks is

28

Untitled-2.indd 28 8/5/09 18:32:01

 ISJ Investor Services Journal
expected in June.
The head of product development
believes that infrastructure changes
will be the main driver of growth. He
notes that INET will replace SAXESS as
Nasdaq OMX’s new trading system for
equities in December while Norway is
changing to TradeElect which will affect
the custody business.
Nasdaq OMX offered an interim
voluntary CCP service from February
and plans a full launch of its new central
counterparty (CCP) in October for
Denmark, Finland and Sweden and in
the first quarter of 2010 for Norway.
In addition other CCP initiatives from
EMCF, SIX x-clear and EuroCCP
will increase choice and further limit
counterparty risk in the market.
“With more MTFs and CCPs entering
the market, will mean it is easier to trade
in the Nordics and also drive down
costs, at least for foreign investors and
for large cap instruments,” says the head
of product development.
“The introduction of CCPs
could create new business and new
opportunities not only for existing
players in the market but also for
newcomers,” adds the Danish trade
official. “We look forward to more CCPs
so we can have interoperability
in the market.”
“Also, with requirements from MiFID
for best execution and competition
between exchanges, then a CCP
helps customers gain access to the
most relevant marketplace for each
transaction,” says the Swedish official.
The head of trading states that a
local bank’s exposure was historically
limited to Nordic risk and some large
international investment banks. The
introduction of a CCP will mean that
exposure in the future will be to all
brokers and banks in Europe. Though
there will be more banks to pay for any
risk from a default of a CCP member,
he says.
The Danish bank trader adds that a
CCP will bring some costs down but also
bring other costs up. “From a custody
perspective the number of transactions
Untitled-2.indd 29
Custody
will fall dramatically but on the other
hand you will also have the clearing cost
“With requirements
to take care of,” she says. from MiFID for
“For us, as a local participant in
our own home market, trading and best execution
execution will be a new cost for us
and it will be expensive to develop
and competition
and set up systems,” adds the head between exchanges,
of trading. “International investment
banks will benefit and save on custodian a CCP helps
costs as they are members of the
CCP.” Nonetheless, he feels the cost is
customers gain
manageable and that it will be easier access to the
to settle trades in the future when
everything is operational. most relevant
The formation of the Nordic
Securities Association in January will
marketplace for
create a stronger financial market by each transaction”
harmonising regulation and supervision
in the Nordic region. “Many of our
members have a Nordic business and
operate cross border in Finland, Sweden
and Norway, as well as Denmark,”
says the Danish bureaucrat. “Further
harmonisation between the markets and
common rules and regulation will be
a huge advantage for securities dealers
and create a level playing field for all Market
members.”
The NSA allows the region to have a FactFile: SEB
stronger say in the European arena and
share common interests with a common Mission: SEB provides financial
voice and with greater clarity, says the services to corporate customers,
Swedish official. “Also external foreign institutions and private individuals.
investors often view the Nordic markets The long-term goal is to have the most
as one and in the long run the more satisfied customers and to be lead-
we can harmonise, the more attractive ing in terms of financial performance
Sweden, and other markets, can become among its peers in Northern Europe.
for foreign investors,” she adds.
The head of product development Method: Key priorities include inten-
supports the move to a more sified activity with SEB ’s attractive
harmonised trading environment for the customer base, offering an extensive
custody and securities markets. range of top-rated services based on
He notes the NSA will allow ex- SEB’s increased focus on productivity,
change of information, ideas and quality and integration.
competences at local and national levels
so participants in the Nordic region can Presence: At year-end 2008, SEB
have a bigger say in the future and keep had some 660 branch offices: 172 in
up with developments in other markets. Sweden, 61 in Estonia, 63 in Latvia, 77
“Aligning things cross border will make in Lithuania, 174 in Germany and 109
it easier and cheaper to set up systems in Ukraine. More than half of SEB’s
as there will be a unified development of approximately 21,000 employees are
the Nordic markets,” he says. n located outside Sweden.
29
8/5/09 18:32:02
 Panel Debate
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
Cayman, Bermuda, Caribbean:
The ISJ Panel
Nick Matthews (left) a
member at Kinetic Partners
went to the firm’s Cayman
Islands office in 2008. Nick
has over 12 years of forensic
accounting and litigation
support experience.
Fund domiciles have encountered significant scrutiny from
regulators and politicians. Time for ISJ to ask a panel of experts
their thoughts.
1.How do you assess the impact
of the recent G20 scrutiny of
offshore domiciles?
KINETIC: Interest in offshore
centers was not unexpected in
the current economic conditions;
industrialised nations need a
scapegoat. Investment vehicles
which facilitated the develop-
ment of complex, and ultimately
toxic, financial products were
frequently domiciled offshore,
for the same fiscal purposes as
many other, less damaging funds.
This scrutiny is unhelpful, has
its genesis in ignorance of the
function of offshore financial ju-
risdictions, and serves to further
fuel the collective paranoia.
Offshore centers themselves
will have to be, and be seen to be,
as conscientious as the onshore
world, although whether they
will be granted a fair hearing
by those railing against them
remains to be seen.
Fear of offshore centers con-
26-39 ISJ39_A.indd 30
Raymond O’Neill, a founding
member of Kinetic Partners, has
spent 20 years working in the
asset management industry and
specialises in providing advice
to investment managers on
investment products in the area
of structuring, distribution and
regulation for both onshore and
offshore markets.
veniently ignores the fact that
the majority of major financial
scandals originate onshore, es-
pecially in the USA; the offshore
element is tangential, in the form
of investors and victims.
Politicians should beware of
unintended consequences born
“Provided a domicile takes tax
information sharing seriously
and is willing to enter into tax
information agreements, it
should satisfy such scrutiny”
Kinetic Partners
out of a lack of understanding.
Curtailing the offshore financial
system in the short-term pursuit
of tax revenue, risks destroying
investment opportunities for
onshore taxpayers. Meanwhile,
30
Siu-Kei Chung, is managing director Peter Hughes (IRE) is the Group
of Butterfield Fulcrum Group
(Bermuda) a leading alternative
fund administrator
the economies of some offshore
jurisdictions which remain sub-
ject to former-colonial oversight,
such as the Cayman Islands’
relationship with Great Britain,
will suffer, serving to increase
the financial burden on the
mother country to support their
protectorates
CHUNG: The G20 action is
unlikely to have a major effect
on well established offshore
domiciles, because although
ISJ Investor Services Journal
Managing Director and founder
of Apex Fund Services Ltd.,
(Apex), a specialist Fund and
Private Equity Administration
Company founded in September,
2003.
governments want to be seen as
taking action against tax havens,
the economic benefits of local
offshore domiciles far outweigh
the downsides. The real concern
about tax havens relates to
money laundering and the flow
of funds from organized crime/
terrorism, and established ad-
ministrators have for many years
carried out full international and
US Patriot Act compliance. Our
experience is that investment
managers are continuing to look
offshore despite threats from
world leaders.
Many of the offshore do-
miciles included on the gray
list have also taken immediate
steps to comply further with
the internationally agreed tax
standards, for instance Cayman
was one of the first to commit to
the OECD tax standard in 2000
and has the highest number of
tax information agreements—
eight—of any jurisdiction on the
07/05/2009 18:16
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e-mail: info@bsx.com
26-39 ISJ39_A.indd 31 07/05/2009 18:16

Panel Debate
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
gray list. And Bermuda, which
already has three tax information
agreements in place, is set to sign
agreements with seven Nordic
countries and New Zealand later
this month. This would bring the
number of agreements signed
by Bermuda to 11, the number
needed to remove it from the
grey list.
HUGHES: The impact will
have two effects, firstly it will
ensure that those that are using
offshore jurisdictions for tax
reduction purposes may no
longer be able to and secondly it
will ensure that offshore fund re-
gimes have tighter controls. It is
likely that offshore domiciles will
adjust their regulations for hedge
funds so that they become closer
to those prescribed in onshore
regulated jurisdictions.
2.Will the status of ‘tax haven’
be sustainable in the future
amid such scrutiny?
KINETIC: This really depends
on what is meant by ‘tax haven’.
If this is viewed purely in a tax
(and not regulatory) context
the focus is tax information.
Certainly this was the message
coming out of the recent G20
meeting. Provided an offshore
domicile takes tax information
sharing seriously and is willing
to enter into tax information
agreements, it should satisfy
such scrutiny. Anything more.
i.e. pressure to impose/increase
tax has not been suggested. Tax
competition exists throughout
the ‘onshore’ world and to try
and suggest offshore domiciles
can’t compete on tax is not sus-
tainable. A jurisdiction receiving
tax information from an offshore
domicile and yet still wanting to
impose tax penalties on those
who invest/do business with such
a domicile, is admitting that it
can’t police its own tax laws and
taxpayers.
Interestingly the progress
report from the independent
review of British offshore finan-
cial centers focused as much on
how the local economies would
survive the financial crisis as it
did on any tax issues.
26-39 ISJ39_A.indd 32
CHUNG: G20 leaders need
to define what constitutes a tax
haven more carefully. The actual
definition is a jurisdiction that
offers significant tax breaks, the
economic benefits of which far
outweigh the downsides. Secrecy
and confidentiality, which should
be where concern lies, is not nec-
essarily a determination of a tax
haven. We are skeptical that the
G20 can muster the political will
to crack down hard on offshore
jurisdictions, especially as all
have so willingly signed up to the
information sharing agreement.
HUGHES: The ‘tax haven’
status will still be sustainable but
only if these domiciles adjust
their legislation to meet the
“We are skeptical that the G20
can muster the political will
to crackdown hard on offshore
jurisdictions”
Siu-Kei Chung,
Butterfield Fulcrum
demands of global transparency.
It is clear that those who do not
adjust the way they operate will
not be sustainable. For those
that do they are still attractive in
that the offer good experienced
service providers that are often at
a lower cost than their onshore
counterparts.
3. What impact would greater
compliance measures asked of
domiciles have on the opera-
tions of funds and their admin-
istration – will it be a needless
burden or a beneficial chance to
demonstrate best practice?
KINETIC: The measures pro-
mulgated by the larger nations
are consistent with the trend
over the past 12 to 18 months
towards qualitative standardiza-
tion to boost confidence in the
financial sector. Consistent, if
not identical, provisions and
expectations between nations is
the topic du jour, although the
road towards the formulation,
32
supervision and enforcement
of anything approaching truly
international standards will be
long and imperfectly mapped.
To a limited degree, this has
been attempted before in the
narrower area of anti-money
laundering (AML) controls.
Over 16 years, since 1993, the
concept of money laundering
evolved from its origins in the
war on drugs, to enshrine tax
evasion, organized crime and the
financing of terrorism. Along
the way, governments, economic
blocs and Non-governmental
organizations (NGOs), such as
the Financial Action Task Force
(FATF), have played a role, as
have global events such as the
September 11 attacks which
galvanized the US government’s
AML efforts and gave the FATF
renewed impetus. Legislation,
such as the USA PATRIOT Act,
the UK’s Proceeds of Crime Act,
Cayman’s Proceeds of Crime Law
and the European Union’s Third
AML Directive followed. Now,
whatever the global regime’s ef-
fectiveness in reducing crime and
terrorism, which is debatable,
financial institutions everywhere
are expected, by their peers and
customers, to comply with AML
procedures. It has been a long
process with tireless effort from
the financial services profession-
als involved.
Perhaps sub-prime was the
financial world’s “9/11” after
which nothing can be the same.
Procedures must be allowed
to vary between jurisdictions
and between each entity, but
if a common, principles-based
regime, with sufficiently skilled,
and robust, local enforcement
Storm
ISJ Investor Services Journal
can be achieved, benefits could
flow. As well as making due dili-
gence more straightforward and
being a marketing tool, compli-
ance with robust standards will,
by definition, bring risk manage-
ment benefits to firms, provided
they are granted the freedom to
assess their risks and plan the
controls that meet their specific
needs. In the post-“light touch”
regulation world, that may be a
pipe dream. If introduced and
imposed clumsily, the result will
be a greater burden for firms,
with the associated costs passed
on to customers.
Expectations on service
providers, such as fund admin-
istrators and directors, will only
increase. Fees may rise, but so
too will potential liability – the
more extensive the sign-off, the
more “trip-hazards” there are.
Intelligently-applied principles,
and documented decisions, will
help.
CHUNG: As a company com-
mitted to providing our clients
with customized and transparent
fund administration solution,
we welcome greater compli-
ance. We offer unique levels of
transparency through our client
portal, BFonline, which provides
on-demand access to accounting
data and positions, performance
attribution, risk reports, investor
statements and service metrics,
all as fully interactive reports
for ease of data manipulation.
Our clients can also extend this
online service to their investors,
providing an additional level of
transparency.
HUGHES: Greater compli-
ance is required – it should
be a standard rather than best
practice adopted by a few.
Compliance is a good thing for
fund operators and particularly,
their investors. It is important
that this adjustment doesn’t add
a large amount of additional
cost for smaller funds. With the
lack of global liquidity currently
many funds are starting up with
smaller amounts of capital and
these need to be encouraged
to be set up in the correct way
so that the funds industry can
07/05/2009 18:16
Storm Advert May 09:Dublin Advert 2008 1/5/09 11:54 Page 1

Navigating the storm

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33

26-39 ISJ39_A.indd 33 07/05/2009 18:16

 Panel Debate
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
evolve into a lower risk and bet-
ter regulated industry. The added
compliance need not involve a
large additional cost burden as
fund administrators generally
have access to all the information
required and should be able to
provide this function without an
onerous cost.
4. If there were a requirement
for all domicile/funds regions
to be harmonised in terms of
regulation and operation, what
effect would this have on Ber-
muda/Caribbean?
Kinetic: Differences between
jurisdictions’ focus (e.g. Cay-
man’s pre-eminence in hedge
funds, compared with Bermuda’s
insurance bias) may make such a
move impractical. There is also
a danger that the competitive
advantages built up over years or
decades could be stripped away.
One size does not fit all and,
ultimately, the domestic regula-
tory requirements of the offshore
centers’ customers will dominate
and drive standards.
The harmonisation will be
regulatory derived around prod-
ucts and consistency of approach
to regulations and operations,
including corporate governance,
in line with the demands placed
on key onshore financial centers.
HUGHES: This would mean
that a significant amount of
work would be required to bring
the regulations in line with
onshore jurisdictions. Gener-
ally, most funds in the Bermuda/
Caribbean domiciles operate in
similar ways to onshore funds
in that they use independent
administrators and strong ser-
vice providers. The effect would
be on the amount of resources
required to adjust the regulatory
regimes in Bermuda/Caribbean
and this may take a significant
amount of time.
5. There are positive signs that
the hedge fund industry is at the
beginning of an upturn after
huge redemptions and political
scrutiny. How do you estimate
the volumes of business for the
rest of this year and 2010 for
their administration?
KINETIC: New fund launches
26-39 ISJ39_A.indd 34
are growing and asset levels
within hedge fund products
are stabilising. We see inves-
tors coming back into the sector
whereby asset levels will have
grown by year end. Performance
is improving across more man-
agers, all of which means more
work for administrators. The
demands for greater due dili-
gence, reporting requirements,
transparency and independent
valuations will lead to more
work for administrators and you
may see fees go up rather than
down even in this environment.
CHUNG: Although we believe
things will remain rocky for the
first half of 2009, fund admin-
istrators are expecting to play
a greater role in hedge funds’
operations, as investors demand
more transparency. Over 50% of
US hedge funds do not employ
a third-party administrator,
but post-Madoff there is an
increasing focus on operational
risk which is putting pressure
on managers to demonstrate to
their investors that their systems,
controls and governance are
effective. For this reason, many
more hedge funds are choosing
to outsource their operations to
an independent provider, who
can satisfy their investors’ need
for more transparency and con-
trols, and provide more frequent
and robust reporting. We see
volumes of business increasing
from the second half of 2009
through 2010.
HUGHES: There will still
be some smaller funds closing
throughout 2009 as managers
realise that they do not have
sufficient assets for their opera-
tions to continue. There will also
be many opportunities for new
managers coming into the mar-
ket looking to build a good track
record for when liquidity return
to the markets. Cash will not stay
on the sidelines indefinitely with
such low interest rates and this
is an opportunity for emerg-
ing managers that have good
strategies and well-managed
risk. These managers are looking
to deliver not just good perfor-
mance but a product that meets
addition compliance criteria and
34
best practice in terms of service
providers. Few administrators
are able to deliver a quality
service at the price that these
emerging managers can afford,
those that can such as Apex Fund
Services Ltd, should do well from
investing in these long term re-
lationships which will hopefully
become large funds over time.
6. Hedge funds are evolving,
which has included a move into
more mainstream elements
of investment, such as UCITS
funds in Europe. What develop-
ment have you seen in the out-
look and operations of hedge
funds and what does it mean to
the administrator?
KINETIC: The move away
from hedge funds’ traditional
marketplace of High Net Worth
Individuals and institutions is
already having a “double-wham-
my” effect on service providers
such as administrators. As less
sophisticated investors become
involved, protection, not least
through regulation, will have to
increase; and if things go wrong
the danger of litigation will be
joined by the risk of regulatory
sanction.
UCITS III provided opportu-
nities for alternative managers to
expand distribution into private
banking and retail channels in
Europe and across the world.
However, alternative managers
wishing to launch UCITS funds
need to ensure that their invest-
ment strategy complies with the
UCITS regime and that they
have adequate risk management
processes in place and the ap-
petite to compete in the private
wealth or retail sectors.
Administrators now serve
innumerable masters, and good
governance, augmented by ef-
fective procedures and controls,
are essential just as downward
pressure on fees to reflect the
evolving client base reduces
margins.
On the positive side, a move
towards more standardized
products may make administra-
tors’ roles more straightforward
as complex structured prod-
ucts are assigned to the history
books...until next time.
ISJ Investor Services Journal
CHUNG: In the current
economic climate, the highly
regulated nature of UCITS III
funds is becoming a popular way
for fund managers to attract and
gain access to a broader investor
base. Managing a UCITS fund
by definition means that the
manager has to have consider-
ably more substance than an
average start up. This includes
specific capital requirements, and
also more sophisticated internal
procedures which the regulator
pays close attention to. Many
fund managers in-house ac-
counting systems are struggling
with the volume and diversity
of new and different types of
positions, and therefore together
with an increased investor ap-
petite for independent reporting,
means great opportunities for
some administrators.
In order to administer UCITS
funds, administrators have to be
based in the same domicile as
the fund and have a full service
offering in order to provide
daily valuation, and risk report-
ing. As many UCITS also need
a ‘sponsor’ or ‘co-promoter’,
independent administrators,
such as Butterfield Fulcrum,
work together with independent
banks as custodian and ‘sponsor’
in order to serve UCITS funds.
We believe this may become a
growing trend.
HUGHES: Some hedge funds
can fit into the requirements
of UCITS funds but for most
managers these structures do
not provide the flexibility for
the managers the deliver the
performance they promise their
investors. There will be a move
from offshore to onshore regu-
lated jurisdictions which may be
dictated by investors. This move
should benefit jurisdictions like
Malta which have capacity to
take on more funds and have a
well-run regulatory regime. As
an administrator it is important
to have the ability and capac-
ity to administer both onshore
and offshore funds. Specialist
offshore administrators will
have to adjust their models if
they are going to compete once
the fallout of the G20 scrutiny is
complete. n
07/05/2009 18:16
 ISJ Investor Services Journal
Fair trade?
New multi-lateral trading facilities
aimed to fully realise the MiFID
directive. But they must be viewed
in context, writes
Brian Bollen
C ui bono? This question –
traditionally associated with the
Roman Cicero and roughly translates
as ‘who benefits?’ – keeps arising
surrounding the apparently unstoppable
rise of multilateral trading facilities
across Europe.
Who benefits, that is, from the time,
energy, money already invested to take
advantage of MiFID, the European
Union directive that seeks best execution
in trading and has transformed the
competitive landscape to achieve it?
26-39 ISJ39_A.indd 35
Explicit prices in trading, clearing and
settlement have reduced – but are the
savings for market participants erased by
the cost to connect to the requisite state-
of-the-art systems?
Vendors benefit. Arbitrage traders
benefit. Anyone paid according to the
volume of transactions undertaken,
rather than by the overall value of
transactions, benefits. But even that is
a double-edged sword, thanks to the
growing fragmentation and increased
complexity that faces brokers, for
35
Exchanges
example.
But do end investors benefit?
“For institutional investors there are
benefits from lower costs and increased
efficiencies, but they say the complexity
is unwelcome that they would rather
have a single market,” argues Andrew
Howieson, an independent capital
markets analyst and consultant. “On the
buy side there will be long-term benefits
but there will be more pain than benefit
in the short to medium term. There are
more parties than ever offering market
07/05/2009 18:16
 Exchanges
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
“Price should not be
the only benchmark.
We all have to make
a profit”
Hirander Misra,
Chi-X
services and that has introduced price
competition, but the contra is that to be
active in all the execution venues you
have to be connected to them all.” And
that, of course, is not cheap.
For Hirander Misra, chief operating
officer at Chi-X Europe, the answer
is clear. “Reductions of 90% in both
trading costs and clearing costs return
value to end investors, but price should
not be the only benchmark; we all,
remember, have to make a profit and
stand on our own two feet, and we
have a long-term business plan that we
believe will take us beyond the market
consolidation that is inevitable.”
In the passage of time it will not
necessarily be higher quality that defines
the outcome. History shows that the
market is capable of turning its back
on true quality. Even the apparent ‘first
mover’ advantage will not necessarily
give an enduring edge, something
Hirander Misra readily concedes.
“Speed was great when we were the
only alternative in town, but we were
also smarter and cheaper than existing
26-39 ISJ39_A.indd 36
venues, as well as the first of the new
wave of providers, but liquidity, and how
you get it from diverse sources, is now
more of a deciding factor than ever,” he
says. “There is no point in having the
fastest trading system in the west if you
don’t have any trades.”
He refuses to be drawn into discussion
of fellow MTF Turquoise, a platform
that faces a major challenge if it is to
be successful in carving out a niche
for itself. Claire Delnoy, director
at Euroclear’s Equities Product
Management division in Brussels, argues
that while MTFs can clearly capture
some volume from Europe’s incumbent
exchanges, she questions their long-term
viability. “I wonder how they can survive
if they don’t generate high enough
levels of income, charging the low costs
that they do today. The driver behind
generating more volume is not only
linked to the execution costs they charge,
but also the flexibility and efficiency of
the post-trade link that each MTF has.
Further progress still needs to be made
in the cases where MTFs have selected
the new central counterparties.”
While Turquoise has been hit by
the ending of the original market-
making commitment by its nine major
shareholders on 13th March, Duncan
Higgins, head of client relationship
management at Turquoise, says that it
is already rebounding. Natural liquidity
from firms who want, rather than need,
to use the venue is returning to previous
levels.
Higgins denies it needs immediate
funding. “We recapitalised for the year
at the beginning of the year,” he says.
“There is some way to go until we
reach profitability so we expect to need
further funding down the line.” He
even counters the industry consensus
on consolidation, arguing that it is
based on a flawed premise. “Everyone
points to what happened in the US and
says it will be repeated here, but the
situation in Europe is not the same. For
consolidation to take place there has to
be a driver, and in the US it was largely
the coming together of complementary
36
ISJ Investor Services Journal
entities.” Instinet, he gives as an example,
had old technology but a strong
membership roster, while Island had
great technology but few members,
making them an obvious fit. Where
exchanges bought electronic crossing
networks because the exchanges didn’t
have good technology, Europe has had
electronic order-driven systems for some
time. “The consolidation driver is not as
obvious in Europe as it was in the US.”
There will be consolidation, adds
Andrew Howieson, but not necessarily
in the form that might traditionally
be expected. “This isn’t to say that
everything will be consolidated from the
current group of players down to two or
three,” he suggests.
“There will be changes in the names
we see today but there could well be
new entrants into the market place
offering something different. What is
the likely timing? Your guess is as good
as mine, but I think we’ll start to see
consolidation taking place over the next
12 to 18 months.”
There will be losers elsewhere in the
food chain. Small and medium-sized
brokers on traditional exchanges will be
priced out of proving best execution by
the expensive connections needed to all
MTFs. The big brokers will benefit at
smaller players’ expense, while investors
will suffer from a loss of pre-trade and
post-trade transparency. The double-
counting, or even triple-counting of
transactions is another problem. If a
single trade is counted in three separate
dark pools, it is difficult to calculate
volume with any confidence in the
degree of accuracy.
Does that reduction in transparency
offset the benefit of price reductions?
Off-exchange bilateral trading in de
facto alternative venues has always taken
place in London and New York. Only the
forms are changing, not the underlying
investment practices, which were always
designed not to spook markets by hitting
them with very large single trades. In
some respects, the rise of the new venues
looks almost like an aid to successful
transition management.
07/05/2009 18:16
 ISJ Investor Services Journal Exchanges

Cees Vermaas, executive director of international investment banks, retail

NYSE Euronext, envisages consolidation
over one to two years. New entrants
will not succeed by offering more of the
same in terms of products and pricing.
They will have to offer something
different if they are to gain traction
with customers, and build a sustainable
business. “If consolidation takes place
among existing venues we’ll see new
ones step up to take on market niches,”
he predicts. “Trading is going to grow a
lot in Europe in terms of the the volume
of transactions. The US and European
populations are of similar sizes, but the
banks and investment boutiques. Our
aim is to bundle liquidity and offer
highly efficient and transparent trading
in open order books.” Cees Vermaas
also deploys the single infrastructure
argument.
The PLUS Markets Group, formerly
OFEX, has so far attracted much less
attention than Chi-X and Turquoise and
BATS Europe or NYSE Arca Europe.
But the multi-faceted PLUS Markets
Group fulfils both its traditional role as
a listing venue, and as an MTF for shares
listed on other exchanges in the UK

US is six-to-10 times larger in trading
terms. There is a lot of potential for
growth.”
Michael Krogmann, head of sales
for Xetra Market Development, part
of Deutsche Borse, argues that the new
trading venues established by traditional
exchanges have one key advantage. “Our
start-up costs are very low as we can use
existing infrastructure and interfaces,
adapting customer interfaces to route
transactions from clearing to local
central securities depositories,” he says. shares traded valued at GBP12.489
“As everyone can use existing lines and
clearing set-ups, it reduces the hurdle
for entry to close to zero. This is a highly
efficient solution that also includes
netting advantages. As Deutsche Börse
Group also runs Eurex, our customers
can implement their arbitrage strategies
involving derivatives and cash equities
in the same infrastructure and the same
location, keeping latency to an absolute
minimum.”
Customers, he says, tell him that this
could give the exchange an absolutely
unique selling proposition. Xetra
International Market will allow 250-plus
customers from 18 countries to trade
blue chip companies on a pan-European
basis with settlement in local central
security depositories, he says. But this
is not just about providing services
to high intensity traders, the business
model adopted by other MTFs. “We
offer around 400,000 products to all
kinds of customers, including brokers,
and Europe. First quarter volume was
up 165%, with March a record month,
with 909,511 trades, a 149% increase
on March 2008, with 41,341 average
daily trades. Trade value reached an
all-time high of almost GBP5 billion, up
63.79% against last year. Year-on-year,
the number of shares traded rose 122%
to a record 6.394 billion shares traded on
PLUS.
Quarter figures showed a huge
increase on last year with 16.5 billion
billion from 2.4 million trades.
Both the number of shares and
bargains traded showed annual quarterly
gains of well over 100%. Other trading
highs include gains in large caps.
Notably the month saw PLUS secure
23.48% market share by trade value in
Lloyds Banking Group stock during
a particularly busy month for retail
trading in financial stocks.
Strong March figures followed solid
gains in February, when PLUS Markets
attracted 7.53% of all UK equity trading
activity according to the Thomson
Reuters MiFID Market Share Report,
making PLUS the third largest trading
venue in the UK. Cyril Théret, business
development director, said: “Our Q1
trading activity clearly demonstrates
PLUS’ ability to offer an attractive and
effective trading venue in the most
competitive conditions and challenging
environment.
“We are particularly pleased that PLUS
is growing market share in competition
“Further progress
still needs to be
made in the cases
where the new
MTFs have selected
the new central
counterparties”
Claire Delnoy
Euroclear
with established exchanges and other
MTFs. 2009 will not be without its
challenges, but we’re looking forward
to offering our members new liquidity
possibilities through offerings such as
PLUS-Europe for pan-European equity
trading, our PLUS-pool dark pool for
small and mid-caps and PLUS-HQ, our
new hittable quote board.”
PLUS-Europe will be offered to
trading participants in London in
conjunction with Bayerische Borse
AG, the operator of the Munich Stock
Exchange, under the fully competitive
regulatory environment already in
place in Germany. PLUS-Europe will
deploy the pan-European passport
rights afforded to market operators
under the EU’s MiFID regime. If, that is,
there is any market left once the current
financial uncertainty sweeping the world
dies down. n

37

26-39 ISJ39_A.indd 37 07/05/2009 18:16

 Comment
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
Superbanks
Bank consolidation has been a feature
of this financial crisis, and their success
depends on a few key factors, writes Nigel
Walder (pictured below), CEO of Business
Control Solutions.
E ach day for the past three months,
as I make my way out of the tube
station, I can’t help wondering if there’s
any going back on this strange new
world that has turned the city up-side-
down.
While many firms and individuals
have suffered huge financial pain, some
have prospered and bought fire-sale
assets that overnight lift them into
the new ‘superbank’ category. But it
won’t all be a bed of roses, and unless
the integration goes well, the acquired
company could end up as much a
liability as opposed to an asset.
There are significant integration
challenges ahead for these superbanks
because – like everything in life
– where there is reward, there is
26-39 ISJ39_A.indd 38
ISJ Investor Services Journal
56
as client perspective, whereas of equal,
if not greater importance, is the culture
of the future organisation. If you call
parts of an overall organisation different
names, how can you expect to create a
unified firm-wide culture?
Most organisations tend to ignore the
cultural aspects of an integration project
and just assume that the acquired staff
will move to their way of thinking.
Experience shows this is far too
important to be left to osmosis, but it is
rarely tackled. In order for this process
to run smoothly, communication is vital,
with executive management playing a
central role in eliminating uncertainties
as quickly as possible.
2. Which model?
Which operating model is going to
be deployed? Over the past three to
five years we have seen firms move
more towards a ‘one bank’ mentality by
leveraging the shared infrastructure.
The problem with this, however, is
that it often results in hybrid models
risk. Organisations are at their
most vulnerable during firm-wide
integrations when uncertainty and
fear dominate, leading to heightened
operational risk and quite often a poorer
client experience. So what do these new
superbanks need to consider?
1. Branding
Let’s take Merrill Lynch being acquired
by Bank of America as an example. What
would you call the new entity, or would
you keep both brands because they
both have brand value? Often within
superbanks, each unit will have its own
brand, which further complicates the
matter. Organisations tend to focus
brand decisions on external factors, such
38
07/05/2009 18:16
 ISJ Investor Services Journal
where by the business line with most
power ends up with the better service.
This creates pressure for poorer
performing businesses. It is therefore
crucial that all factors are taken into
account and that integration is swift.
Many banks claim that the customer
is central to their strategy. However,
if that’s the case, why are the client
requirements not central to the way
banks organise themselves? As the
majority of banks align themselves by
product, difficulties can arise when
trying to service customers with multi
product needs, as the products can be
spread out across the two entities.
The larger the superbank, the more
challenging it is to provide a seamless
interface to clients. A constant battle
internally for superbanks is who owns
the client relationship, given this
normally dictates who receives the lion’s
share of the revenue. Unfortunately this
can often take precedence over what may
be in the best interests of the client.
3. Risk and accountability
As people start to ask ‘are you in
control of your business?’, executive
management need to consider this
carefully, when responding to regulators
and shareholders. In order to reaffirm
their confidence, a holistic view of risk
– including credit, market, liquidity,
reputational and operational – that is
easy to understand and can be acted on
accordingly is required.
While easy to accept at a concept
level, this is more challenging when
implementing. Market risk and credit
risk methodologies are relatively mature,
but operational risk is different – still
relatively embryonic and extremely
broad in nature.
Indeed, even the definition of it is
pretty tricky. It tends to be the bucket
in which all other risks are put. Basel II
requires banks to put aside capital on
their balance sheet, designed to avoid a
systemic issue. Unfortunately, like many
other regulations, banks have focused
their efforts on minimising the cost of
regulations as opposed to embracing the
26-39 ISJ39_A.indd 39
spirit of what’s intended.
Just to be clear, I’m not suggesting
that the current crisis was caused by
operational risk. The recent turmoil was
caused by a number of factors including
culture (ie, risk management not having
sufficient clout) and ignoring the impact
of liquidity. But there is an equally large
flaw which rarely gets discussed. As
operational risk departments tend to be
pretty isolated from units such as finance
and operations, there tends to be a lack
of understanding as to where problems
occur, who should follow them up and
“There tends
to be a lack of
understanding as
to where problems
occur, who should
follow them up and
how they should be
reported”
how they should be reported, especially
in large firms.
So what’s needed to monitor the
risk within these operational units? The
answer is transparency, which can only
come about via effective communication
between senior management and people
in the line functions. Given the size and
reach of superbanks this can’t be done
verbally. It has to be systemised. This level of transparency should
Operational risk needs to be
embedded in the fabric of an
organisation – its people. So superbanks
should focus more on providing a
glass bottom boat ride across their
organisation than a black box calculator.
A number has no context and
for the foreseeable future is not an
appropriate tool for helping executive
management manage their operational
risk. Operational risk is an art not a
science so it needs to be treated as such.
A number of superbanks now have the
government as considerable shareholders
and they will want to see much greater
39
Comment
“Many banks claim
the customer is
central to their
strategy. If that’s
the case, why are the
client requirements
not central to the
way banks organise
themselves?”
transparency, and have significantly
more authority than the traditional
shareholder.
In addition, the recent investment by
banks in complex modelling to minimise
the amount of capital required for Basel
II is completely contrary to the recent
emphasis imposed by governments to
increase the amount of tier one capital.
Tightly coupled to operational risk
is governance over the balance sheet.
Superbanks have literally millions of
accounts which are subject to millions
of transactions on a daily basis. This
is amplified during integration when
aggregated financial management and
reporting is required across multiple
platforms with finance departments
having to temporarily bridge the gap. In
order for firms to sign off comfortably
on their balance sheet, total transparency
is needed.
be capable of showing problematical
accounts and identifying patterns, so
when aggregated up, the warning bells
proactively go off to senior management.
It should also provide an opportunity
for management to attribute a relative
risk weighting over the accounts.
So the next two to three years will
see intensive activity within the newly
created superbanks as they battle to
extract costs while at the same time keep
key employees and clients. Speed of
execution and total transparency of risk
will be vital if they are to be successful. n
07/05/2009 18:16
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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 leading custody services provider in the region. Nordea
provides high quality, tailor-made custody services for local and foreign investors dealing with Contact:
Nordic and Baltic securities. Due to the unique history of being formed from four established Nina Groth
banks, Nordea is the only Nordic custody provider with strong local presence and expertise in all Head of Sub-custody and Clearing
four markets. Nordea combines Nordic competence with local expertise, and has proven ability Tel: +45 3333 6124
to deliver high quality services that meet both clients’ and each local market’s requirements. E-mail: nina.groth@nordea.com
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.

www.rbcdexia.com
RBC Dexia Investor Services offers a complete range of investor services to institutions T: +44 (0) 20 7653 4096
worldwide. Our unique offshore and onshore solutions, combined with the expertise F: +44 (0) 20 7248 3946
of our 5,500 professionals in 16 markets, help clients grow their business and sustain Contact: Antony Johnson
enhanced performance through efficiency improvements and robust risk management Global Head Sales and Distribution
processes. Equally-own by RBC and Dexia, the company ranks among the world’s top 10 E: antony.johnson@rbcdexia.com
global custodians with USD 1.9 trillion in client assets under administration. Address: 71 Queen Victoria Street,
London, EC4V 4DE, UK

Santander is Spain’s leading financial institution and the largest bank in the euro zone
by market capitalization. Our commitment and contribution to the securities industry is
T: Europe: (34) 91 2893932 / 28
well established after more than a century of providing services in this field.
T: USA: (1212) 350 39 02
Santander’s cutting edge technology enables it to offer a comprehensive array of
W: santanderglobal.com
innovative services in a broad range of markets. Santander currently has full local
E: globalsecurities@
capabilities in Iberian and Latin American markets along with a franchised presence in
gruposantander.com
many others. Santander`s experience and product range ensures that every aspect of
the securities business is fully contemplated.

Financial Asset Services is the custody and investments-servicing division of Standard

Bank, providing a unique suite of services to sophisticated investors in South Africa and A:Standard Bank
eight sub-Saharan markets. Investor Services
Securities Lending Department
Standard Bank has assets under custody to the value of ZAR1.56 trillion and an overall 25 Sauer Street
market share of approximately 40%. 2nd Floor, Entrance 3
Johannesburg 2001
Standard Bank’s unique selling point lies in its consultative approach to South Africa
relationships combined with the bank’s commitment to custody and investment T: +2711 636 6615
administration services. E: adam.bateman@standardbank.co.za
W: www.standardbank.co.za

SEB is the leading provider of securities services in the Nordic and Baltic area. We
are committed to custody and clearing processes for the wholesale market. We hold
T: +46 8 763 53 04
securities worth over 560 bn EUR and provide services in more that 75 markets, 10 of
F: +46 8 763 69 30
them under the SEB name (Sweden, Norway, Finland, Denmark, Luxembourg, Germany,
C: Goran Fors, Global Head
Estonia, Latvia, Lithuania and Ukraine).
of Custody Services
We offer a full range of securities services including corporate action and information
E: goran.fors@seb.se
services, securities lending and services to remote members of the Nordic and Baltic
W: www.seb.se
stock exchanges. We continuously develop new products in connection with clients and
partners to ensure we deliver the high-quality products our clients demand. We always
strive to make the processes more efficient. With a history of over 150 years in the
securities industry; we know the market and our clients well.

Société Générale Securities Services offers institutional investors, asset managers and Sébastien Danloy
financial intermediaries a comprehensive range of financial securities services: custody, Global Head of Sales,
clearing & trustee services, fund administration, asset servicing and transfer agency. Investor Services
SGSS currently ranks 3rd European custodian and 9th worldwide custodian (Source: Société Générale Securities Services
Globalcustody.net) with EUR 2,580* billion in assets held and valuates 4,354* funds T: +33 (0)1 41 42 98 65
representing assets of EUR 405* billion (as of June 2007). E: sebastien.danloy@socgen.com
W: www.sg-securities-services.com

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Standard Chartered leading the way in Asia, Africa and the Middle East. Standard
C: Neil Daswani,
Chartered has a history of over 150 years in banking and is in many of the world’s fastest-
Global Head, Securities Services
growing markets with an extensive global network of over 1,200 branches (including
T: +65 6517 0022
subsidiaries, associates and joint ventures) in over 50 countries in the Asia Pacific Region,
E:
South Asia, the Middle East, Africa, the United Kingdom and the Americas. As one of
Neil.Daswani@sg.
Asia’s leading custodians, Standard Chartered has an impressive track record across the
standardchartered.com
16 Asian markets in which it provides securities services. It serves global, regional and
W: www.standardchartered.com
local custodians and broker-dealers, as well as local and regional fund managers. The
Bank plays a key role in promoting the development of these markets and keeping the
international investor community informed of industry developments across the region.

Swedbank provides client-focused custody services to domestic and international

securities lending (including auto-borrow facilities), derivative clearing services, proxy
voting, full corporate actions and income service. Flexibility is an important aspect of
Swedbanks products and services. Our dedicated Client Relations Managers and Account T: +46 8 5859 1800
Managers are focused on personalized processing and reporting solutions. F: +46 8 7237 147
Other Features: C: Neal Meacham, Head of Custody
• ISO9001:2000 quality certification. E: neal.meacham@swedbank.com
• Swedbank Markets Online (SMO) internet information and reporting tool for A: Stockholm SE 105 34 Sweden
Custody and Securities Lending.
• Nordic Custody alliance with DnB NOR (Norway), OKO Bank (Finland) and
Amagerbanken (Denmark) to offer regional custody product.
Institutional Assets under Custody: USD 70 billion

Data Services
Market Data & Analytics provides high-value real-time market data, indices and back Avox
office services. Information from diverse sources are provided to its customers, tailored Redwither Tower
to their specific information needs. Accuracy and reliability are ensured by collecting Redwither Business Park
the data from the Group’s own trading platforms, such as Xetra® and Eurex® and Wrexham, LL13 9XT
cooperation partners like STOXX Ltd. and the Irish Stock Exchange. Avox®, a majority- United Kingdom
owned subsidiary, validates, corrects, enriches and maintains
business entity data. With an operational model, unique in the industry, Avox® enables T: +44 (1978) 661 813
clients to comply with regulatory requirements and to achieve a holistic view of the risk F: +44 (1978) 661 668
exposure towards a client. W: www.avox.info

Interactive Data Corporation (NYSE: IDC) is a leading global provider of financial market www.interactivedata.com
data, analytics and related services to financial institutions, active traders and individual T: 020 7825 7800
investors. The Company’s businesses supply real-time market data, time-sensitive F: 020 7608 3514
pricing, evaluations and reference data for millions of securities traded around the Brendan Beith
world, including hard-to-value instruments. Many of the world’s best-known financial European Sales Director
service and software companies subscribe to the Company’s services in support of their eu-info@interactivedata.com
trading, analysis, portfolio management and valuation activities. Through its businesses, Fitzroy House
Interactive Data Pricing and Reference Data, Interactive Data Real-Time Services, 13-17 Epworth Street
Interactive Data Fixed Income Analytics, and eSignal, the Company has approximately London EC2A 4DL UK
2,300 employees in offices located throughout North America, Europe, Asia and
Australia.

SmartCo is a leading provider of data management solutions for the financial industry. For further information: www.smartco.fr
SmartCo’s software, Smart Financial Data Hub, covers all the data area, including or info@smartco.fr
financial instruments, market data, third parties, funds, transactions, and provides full
connectivity, a powerful and user friendly front-end, traceability, quality control, data SmartCo
enrichment and customisable workflow. 37 rue de Liège
Our solutions are based on SmartPlanet, an innovative technology focused on data 75008 Paris
management, and able to meet evolving business requirements. France
SmartCo offers to its customers the ability to respond in the fastest way to regulatory and T: + 33 1 58 22 29 60
business changes. E: info@smartco.fr
W: www.smartco.fr

Fund Administration
For more information visit our website:
Established in 2002, IMFC Fund Services B.V. is a boutique hedge fund administrator www.imfcfundservices.com
and a trustee with its offices in Amsterdam and Sydney. IMFC offers third parties
administration and related services to all type of onshore and offshore funds combining www.imfcfundservices.com
high quality, independency, technology, timely calculation with flexibility, experience, t +31.20.644.4558
f +31.20.644.2735
custom-made solutions and competitive rates. Our services include: fund set-up and
Mrs. Consuelo Nardon
corporate services, NAV calculation and other accounting services, R&T agent and other
e: consuelo.nardon@imfc.nl
investors and compliance services.
Rivierstaete Building, Amsteldijk 166,
1079 LH Amsterdam, Netherlands

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 ISJ Investor
ISJ Investor Services
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Journal ISJDirectory
ISJ DirectoryofofServices
Services
C: William J. Salus
A: PNC Global Investment Servicing,
301 Bellevue Parkway
Wilmington, DE 19809 USA
As one of the world’s leading third-party fund administrators, PNC Global Investment T: 302.791.2000
Servicing has over 35 years of experience delivering personalised solutions to asset E: information@pncgis.com
managers, distributors, and financial advisors worldwide. PNC services an international C: Fergus McKeon
client base from service centres in the United States, Luxembourg, Ireland and Poland, A: PNC Global Investment Servicing
additional offices in London and New York, and a presence in the Cayman Islands. Riverside Two
Sir John Rogerson’s Quay, Dublin 2,
Ireland
T: +353-1-790-3500
E: information@pncgis.com

Société Générale Securities Services offers institutional investors, asset

managers and financial intermediaries a comprehensive range of financial securities Sébastien Danloy
services: Clearing, Liquidity Management, Custody and Trustee, Fund Administration, Global Head of Sales
Asset Servicing, Fund Distribution Services and Issuer Services. SGSS currently ranks 3rd Société Générale Securities Services
European custodian and 7th worldwide T: +33 (0)1 41 42 98 65
custodian (Source: Globalcustody.net) with EUR 2,731* billion in assets held and valuates E: sebastien.danloy@socgen.com
5,158* funds representing assets of EUR 499* billion (at end March 2008). W: www.sg-securities-services.com

Swiss Financial Services

Drawing upon an extensive track record of proficiency, dependability and (Ireland) Ltd.
responsiveness, Swiss Financial Services acts as administrator as well as registrar and Block 4B,Cleaboy Business Park,
transfer agent of funds investing in a broad range of financial instruments. These Old Kilmeaden Road,
include futures, foreign exchange, equities, options, bonds and other funds. Waterford, Ireland
T: +353 51 351180
We perform accounting and administration services for diverse fund types domiciled F: +353 51 871595
in, but not limited to, the United States, Bahamas, Cayman Islands, B.V.I. and Ireland.
Adrian Maher
E: amaher@swiss-financial.ie

Luxembourg: Jean-Paul Gennari,

tel. +352-44-1010 1
Fund Services is a dedicated fund administrator providing customized and flexible services for Switzerland: Markus Steiner,
traditional and alternative investments. tel. +41-61-288 4910
Our comprehensive range of services for investment funds includes fund set-up, registration and W: www.ubs.com/fundservices
support around the world, fund accounting, NAV calculation, risk control and reporting. We have C: Andre Valente
practical experience with registering funds in 28 jurisdictions. T: + 41 61 288 6269
We provide a flexible offering from the full range of services, including Private Labelling, to selected E: andre.valente@ubs.com
functions. Through our leading fund administration architecture, multi-source pricing and powerful A:UBS Global Asset Management -
compliance tools, we offer a tailored, cost effective service. www.ubs.com/fundservices Fund Services, Brunngässlein 12,
PO Box CH-4002 Basel, Switzerland

Hedge Fund Administration

Apex Fund Services Ltd is a global hedge fund administration solution for hedge funds C: Peter Hughes
and private equity clients located in 12 separate jurisdictions across the globe. The Group Managing Director
company uses the software solution, PFS PAXUS, which is a fully integrated hedge fund T: +1 441-292-2739
accounting system combined with web-based reporting to allow clients and investors F:+1 441-292-1884
to access their information 24/7 securely online. We will tailor all solutions to meet E: peter@apex.bm
your needs and our continuing focus on the quality of service and the relationship with John Bohan
each and individual client ensures that we retain our ethos of providing a personalized Group Manager of Operations
service rather than a generic solution. T: +353 21 4633366
Highly qualified and experienced staff, mirrored with top tier technology and F: +353 21 4633377
competitive fee structures make Apex Fund Services Ltd the clear choice for your fund E: John@apexfunds.ie
administration needs.

Custom House Administration &

Custom House, which is one of the world’s largest independent alternative investment and
Corporate Services Limited
hedge fund administrators, was awarded a SAS 70 Type I in May 2007 and a SAS 70 Type II in
A: 25 Eden Quay, Dublin 1, Ireland
December 2007.
T: +(353) 1 878 0807
Custom House offers a round-the-world, round-the-clock service from its office in Dublin and F: +(353) 1 878 0827
representative offices in Chicago and Singapore, enabling it to provide, not only complete C: dermot.butler@
global administration services, but also the ability to produce daily dealing NAVs. customhousegroup.com
Custom House is authorised by the Irish Financial Regulator under Section 10 of the C: david.blair@
Investment Intermediaries Act, 1995, which authorisation does not extend to the Chicago customhousegroup.com
and Singapore representative offices. www.customhousegroup.com

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Cayman Islands: Darren Stainrod,
Fund Services holds a leading position in the area of hedge fund administration tel. +1-345-914 1076
with specialized teams around the world. We offer a complete range of services Eire: Don McClean, T: +353-1-436 3636
including accounting, NAV calculation, shareholder services, banking and credit US: Concetta Mastrangelo,
facilities. tel. +1-212-882 5523
With specialist expertise in both single manager and fund of hedge fund Hong Kong: Michelle Chua,
administration, services can be provided for both onshore and offshore funds. tel. +852-3712 2387
W: www.ubs.com/fundservices
Through our comprehensive range of services and products, leading edge
C: Darren Stainrod, T: ++1-345-914 1076
technology platforms and superior client service, we work in partnership to offer E: Darren.stainrod@ubs.com
the solutions you need. A: UBS Fund Services (Cayman) Ltd, PO
Box 852 GT, Grand Cayman, Cayman Is

International Finance Centres

The British Virgin Islands has created a progressive and transparent environment for the
establishment and regulation of mutual/hedge funds and their functionaries. By the end British Virgin Islands
of Q3 2006 the BVI had recognised or registered more than 4,000 funds, and licensed International Finance Centre
some 700 managers and administrators, making the BVI a leading domicile of choice for Haycraft Building
investment business. Benefits of conducting investment business in the BVI include: 1 Pasea Estate
• Fast-track registration and licensing system - funds can be registered in a few days. Road Town
• Presence of qualified, experienced legal, accounting & administration practitioners. Tortola
• A well-developed corporate professional infrastructure. British Virgin Islands
• Modern, robust and cost-effective regulatory and corporate regimes. T: +1 284 494 1509
• BVI private and professional funds fall outside the scope of EU Savings taxation Directive. F: +1 284 494 1260
• Segregated Portfolio Companies - also known as Protected Cell Companies - can now be W: www.bviifc.gov.vg
formed as mutual funds under the BVI Business Companies Act 2004.

Payments & Settlements

VocaLink is the payment transaction specialist. Trusted by the world’s top banks VocaLink
our automated payment system processes over 90 million transactions per day. The Drake House
VocaLink switching platform powers the world’s busiest ATM network and provides Homestead Road
end-to-end management of Europe’s largest ATM estate, while the Real-Time Rickmansworth
Payments platform provides the central infrastructure for the UK Faster Payments Hertfordshire
service. The VocaLink EuroCSM delivers reach for our clients throughout the SEPA WD3 1FX
and beyond with a range of value-added services that leverage our know-how and
technical capabilities. VocaLink is the partner of choice internationally, working T: +44(0)870 1650019
with BGC to process Sweden’s automated payments. F: info@vocalink.com
Find out how we can help your business at www.vocalink.com W: www.vocalink.com

Prime Brokerage
Newedge Global Prime Brokerage Group is a global, multi-disciplinary, solution-
providing team dedicated to delivering superior services to alternative investment Philippe Teilhard de Chardin,
industry participants including hedge funds, commodity trading advisors (CTAs), Global Head of Prime Brokerage
fund of hedge funds, family offices, and institutional investors (insurance companies, T +44 20 7676 8536
banks and pension funds). The Newedge prime brokerage team offers a global range Vincent Tournant, Head of Business
of brokerage services covering a wide range of asset classes including equities, Development T +44 20 7676 8171
bonds, currencies, commodities, and their related listed and OTC derivative products. Duncan Crawford, Head of Capital
We also offer an innovative portfolio-based cross-margining solution, a dedicated Introductions T +44 20 7676 8504
account management desk, hedge fund start up services, quantitative information on E: pbinfo@newedgegroup.com
the hedge fund industry, capital introductions services, and recently prime brokerage www.newedgegroup.com/primebrokerage
services to Sharia compliant hedge funds. Newedge is wholly owned by Calyon and
Société Générale, with both companies having 50% ownership.

Securities Lending
Data Explorers (www.dataexplorers.com), based in New York and London, is the UK: 2 Seething Lane, London, EC3N 4AT
world’s most complete resource for data, analysis and insight into securities T +44 (0) 20 7264 7600,
lending and short selling. The company’s proprietary data gives an unrivalled, F +44 (0)20 7392 4004
comprehensive view on share lending and short-selling activity. With data sourced US: 75 Rockefeller Plaza, 19th Floor
directly from securities lending desks of over 100 of the top lending firms and New York, 10019, USA
representing most of the global securities lending market, Data Explorers has built T +1 212 710 2210 F + 1 212 710 2212
a reputation with leading financial institutions as the source for short intelligence Julian Pittam T +44 (0) 207 264 7616
that informs their decision-making and their coverage of market sectors and E:julian.pittam@dataexplorers.com
companies. Please visit our Blog: dataexplorers.com/news, Twitter, twitter.com/ New York: Ken Read T +212 710 2210
dataexplorers, Video dataexplorers.com/daily-briefing and LinkedIn linkedin. E: kenneth.read@dataexplorers.com
www.dataexplorers.com
com/companies/data-explorers sites.
www.equilend.com
EquiLend is a leading provider of trading services for the securities finance EquiLend Europe Ltd.
industry. EquiLend facilitates straight-through processing by using a common 14 Devonshire Square
standards-based protocol and infrastructure, which automates formerly manual London, EC2M 4TE
trading processes. Used by borrowers and lenders throughout the world, the +44 (0) 207 426 4426
T: UK- +44 (0)20 7743 9510
EquiLend platform allows for greater efficiency and enables firms to scale their C: Michelle Lindenberger
business globally. Using EquiLend’s complete end-to-end services, including pre- E: michelle.lindenberger@equilend.com
and post-trade, reduces the risk of potential errors. The platform eliminates the A: 17 State Street, 9th Floor
need to maintain costly point-to-point connections while allowing firms to drive New York, NY, 10004
T: US- +1 212 901 2224
down unit costs, allowing firms to expand business, move into different markets, C: Michelle Lindenberger
increase trading volumes, all without additional spend. This makes the EquiLend E: michelle.lindenberger@equilend.com
platform a cost-efficient choice for all institutions, regardless of size. W: www.equilend.com

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ISJ DirectoryofofServices
Services
eSecLending is a full service securities lending agent and administrator of
customized securities lending programs. Their program has been adopted by many of
the world’s largest and most sophisticated asset gatherers including pension funds, T: US- +1 617 204 4500
mutual funds, investment managers and insurance companies. They are a third party T: UK- +44 (0)20 7469 6000
industry specialist providing lenders with customized programs, high touch client C: Christopher Jaynes
service, comprehensive risk management, and superior risk adjusted returns. The E: info@eseclending.com
firm takes a highly consultative approach with their clients by structuring separate, W: www.eseclending.com
non-pooled programs and utilizing a competitive auction to determine the optimal A: 175 Federal Street, 11th FL, Boston, MA
route to market for their clients’ lendable assets. Having built their business to 02110, US
incorporate investment practices such as the use of specialists, multiple-managers,
unbundling, price transparency, and competition, their approach ensures best A: 1st Floor, 10 King William Street,
execution and also provides clients with greater control over their programs, allowing London EC4N 7TW, UK
them to more effectively monitor and mitigate risks and counterparty relationships.

Eurex is one of the largest derivatives exchanges and the leading clearing house
in Europe. Wherever you are located, we provide you with access to the benchmark
futures and options market for European derivatives. Eurex also offers short term
W: www.eurexseclend.com
funding products, such as Eurex Repo. Eurex Repo is among the forerunners in
T: +41 58 854 2066
providing integrated trading and clearing for repo transactions. Eurex’s latest F: +41 58 854 2455
innovative marketplace is called Eurex SecLend. E: info@eurexseclend.com
Eurex SecLend. Europe’s leading investment banks participate as borrowers Eurex Zurich Ltd., Selnaustrasse
in the Eurex SecLend marketplace, acting as principal brokers, dealers and 30, 8021 Zurich, Switzerland
intermediaries. They all benefit from Eurex’s leading state-of-the-art trading and
processing services. For Eurex, service and technology innovation is not just a
buzzword. New trends are being transformed into inventions through the adoption
of advanced trading practices. Find out more on www.eurexseclend.com.

FINACE® is the only fully integrated solution today which supports the future T: +41 (0)44 298 92 00
business model within the area of Securities Finance and Collateral Management. F: +41 (0)44 298 93 00
The architecture of FINACE® is based on a stable, leading edge technology A: COMIT AG, Pflanzschulstrasse 7,
platform, which was developed with performance and robustness as the focus of CH-8004 Zürich, Switzerland
design. With flexibility at its core, customer-driven extensions and modifications W: www.finacesolution.com
can be quickly and easily applied to the standard component set. www.comit.ch

JPMorgan’s Securities Lending program is unparalleled due in no small part to New York: William Smith
T: 212-623-5664
the Firm’s breadth of capability, financial strength, professional expertise and
E: william.z.smith@jpmorgan.com
seamless operations. Our program enables investors to access a broad spectrum of
London: Michael Fox
lending markets, with a diverse borrower base, offering a broad indemnification T: 44 207 742 0256
against borrower default, while achieving very competitive bids for their E: michael.uk.fox@jpmorgan.com
securities - all of this in an environment designed not to compromise the activities Sydney: David Brown
of their fund managers. As one of the founding members of EquiLend, a global T: (61-2)92504606
automated platform for borrowers and lenders, JPMorgan is at the forefront E: david.ldn.brown@jpmorgan.com
of technology and is ideally placed given its integrated lending, custody and W: www.jpmorgan.com/wss
accounting platforms.

Santander is the only Spanish financial institution with a team exclusively

dedicated to securities finance & with the purchase of Abbey in 2004 has W: www.gruposantander.com
expanded its capacity on a Global basis with trading teams in London (UK) & T: (3491) 289 39 42/54
Connecticut (USA). E: securitieslending@
gruposantander.com
Santander’s leading local capabilities in Spain, Portugal, UK, USA & Latin
America, along with its solid balance sheet & combined with the state-of-the-art
technology, provides its clients with the broadest range of solutions in securities
lending & financing, including availability across all assets classes, as well as
access to uncommon emerging markets.

Around the world, securities financing is managed on SunGard’s Email: securities.finance@

proven solutions for international and U.S. domestic securities lending and sungard.com
repo for over 250 clients. Through our Loanet, Global One, Martini and Astec Contact:
Analytics products and services, we provide comprehensive business solutions EMEA: +44 (0) 20 8081 2779
and information with worldwide reach for equities or fixed income securities America’s: +1 (646) 445-1179
financing. These solutions – all in an integrated, exception-based processing Asia Pacific: + 62276400
architecture – includes order routing, pre-trade analytics, trading, position Visit: www.sungard.com/
management, operations, accounting, settlement and reconciliation. securitiesfinance

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InvestorServices
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BI-SAM is a leading provider of analytics software, client reporting and data

management solutions to the investment management community.
Our integrated and innovative solutions have already been adopted by many A: BI-SAM Ltd
renowned asset managers in France, Belgium, Luxembourg, UK, Hong Kong and 1 Cornhill
Singapore who have assets under management ranging from 10 to 450 billion Euros. London EC3V 3ND
The B-One suite of products covers: performance measurement, performance T: +44 (0)20 3008 5834
attribution (equities, balanced and fixed income), risk attribution (ex-post and ex- F: + 44 (0)20 3008 5831
ante), as well as multi-lingual client reporting and factsheets. This suite of products E: marketing@bi-sam.com
can be used either as stand-alone applications or ASP hosted solutions. W: www.bi-sam.com
The Company has approximately 45 employees in offices located in Europe (Paris,
London, Luxembourg). Offices in Asia and North America are under consideration.
The Company is headquartered in Paris.

DST International is the world’s premier vendor of technology solutions to the global investment T: UK +44 (0)20 8390 5000
management community with over 700 clients in 55 countries, and 1500 employees in 19 of the Boston +1 617 482 8800
world’s leading financial centres. Our wide range of asset management solutions meet the needs of Hong Kong +85 225 812 880
fund managers, dealers, settlement staff, custodians and record keepers operating as international F: +44 (0)20 8390 7000
asset managers; from front office simulation, opinion management and modelling functions, E: info@dstintl.com
through data management, dealing and settlement to custody and corporate actions. The suite of A: DST House, St Mark’s Hill, Surbiton,
products can be used either as stand-alone applications or brought together in flexible combinations Surrey, KT6 4QD
according to specific needs. W: www.dstinternational.com

Eagle Investment Systems LLC is a global provider of financial services technology,

serving the world’s leading financial institutions. Eagle’s Web-based systems support W: www.eagleinvsys.com
the complex requirements of firms of any size including institutional investment T: +44 (0) 20 7163 5700
managers, mutual funds, hedge funds, brokers, public funds, plan sponsors, and F: +44 (0) 20 7163 5701
insurance companies. Eagle is committed to providing enterprise-wide, leading-edge A: The Bank of New York Mellon
technology and professional services for investment accounting, data management, and Financial Centre
performance measurement. Eagle’s product suite is offered as an installed application or 160 Queen Victoria Street
can be hosted via Eagle ACCESS, Eagle’s application service provider. Eagle Investment London EC4V 4LA
Systems LLC is a division of The Bank of New York Mellon Corporation. To learn more
about Eagle’s solutions, contact sales@eagleinvsys.com or visit www.eagleinvsys.com.

Financial Tradeware provides integrated solutions for medium to small sized Investment
Management firms, Fund Managers and Hedge Funds, covering the full trade life cycle. W: www.f-tradeware.com
It is part of the Dharma Group of companies and benefits from the joint contributions T: +44 (0)20 7493 2773
and experiences within the group of market traders, business analysts, financial services F: +44 (0)20 7495 4858
professionals and skilled Microsoft Certified programmers. The company has developed a C: Graham Bright
suite of applications that integrate and Straight Through Process (STP) real-time trading, E: info@f-tradeware.com
back office administration, accounting and compliance. Ultra.net®, S-Messenger® and A: 31 Dover Street
H-Fund® arwe the company’s flagship products all based on Microsoft.NET infrastructure. London W1S 4ND UK
The company also offers a Member Concentrator for hosted SWIFT connectivity and Member
Administered Closed User Group (MA-CUG) services for Corporates and Hedge funds.

Isis Financial Systems provides mission critical investment management software and
services to many large and small companies. Our customers perform a broad range of
functions including fund accounting, derivative and hedge funds, wealth management, Contact:
and pension and endowments, etc…. Our integrated solution services the front, middle, Isis Financial Systems
and back offices of these companies with software that accommodates most any security 14 Felton Street
type. Built on a contemporary three tiered architecture our application helps financial Waltham, MA 02453
companies improve operating efficiencies, increase accuracy and reliability and improve Sales@IsisFS.com
customer service. (00-1) 781-209-0262
IsisFS has the experience and IMS has the tools to improve your operations and save you
money.

GL TRADE is your global financial software solutions company, operating in over 50

countries and serving 1,600 clients. We are the leading provider of multi asset front to www.gltrade.com
back solutions, connectivity and information services. We deliver trading solutions that
ensure our clients success on securities, listed derivatives, commodities, fixed income GL TRADE
and foreign exchange. Cheapside House
Dedicated to post trade securities operations, GL RIMS is your comprehensive real time 134-147 Cheapside
securities post execution processing solution, covering middle office, settlement and EC2V 6BJ London UK
accounting requirements. Its wide use of automation enables global capital markets Tel: +44 207 665 6200
organisation to achieve maximum STP. It is a flexible, highly scalable and easy to install Email: marketing@gltrade.com
platform with a new Service Oriented Architecture feature that allows smooth and
efficient connections with other third parties within a company.

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 ISJ Investor
ISJ Investor Services
Services Journal
Journal ISJDirectory
ISJ DirectoryofofServices
Services

A:IGEFI Group Sàrl - 7, Rue des

IGEFI is the foremost provider of software solutions for international fund promoters, Primeurs,
third-party service providers and fund managers. Its prestigious client-base is testimony L-2361 Strassen
to our commitment, service and quality with more than 200 expert staff supporting T: +352 26 44 211
clients from seven offices worldwide including Bangalore, Boston, Frankfurt, Geneva, F: +352 26 44 21 44
London, Luxembourg and Paris. MultiFonds is operational in more than 20 countries E: marketing@igefi.com
worldwide and support investment funds assets in excess of US$ 2 trillion. MultiFonds W: www.igefi.com
Fund Accounting and MultiFonds Transfer Agency are developed on a “one system-one C: Mr. Jesper Steiness - Head of
database” philosophy and provide significant advantages including reduced overhead Business Development
and IT support costs and single look and feel reporting for global clients. Europe & Asia
E: jesper.steiness@igefi.com

For more information on Information

Mosaic, please visit our website at
Information Mosaic is a global provider of advanced custody, corporate actions and wealth www.informationmosaic.com
Global:
management solutions to the global securities industry. Information Mosaic’s business
emullan@informationmosaic.com,
professionals leverage decades of financial industry expertise and technical knowledge
US:
to deliver complex projects on time and within budget. Since inception, the company emadigan@informationmosaic.com
has utilized the most modern technology to develop solutions to run on a scalable, Europe:
single platform. Today, Information Mosaic supports clients from offices in Boston, aleyder@informationmosaic.com
Dublin, London, Luxembourg, New York and Singapore. Currently, six of the top 10 global Asia:
custodians deploy Information Mosaic solutions worldwide. djennings@informationmosaic.com
General Enquires:
jflett@informationmosaic.com

For more than a decade, administrators, managers, and advisors have relied
on KOGER for dependable software tools backed by extensive industry T: 001-201-291-7747
experience and expertise. Now, for those who want to reduce costs and streamline F: 001-201-291-7808
business processes, Koger offers Fully Integrated Fund C: Mr Ras Sipko
Administrator, a vertically integrated suite serving the back-office software needs of the E: ras@kogerusa.com
fund industry. KOGER USA
Fully Integrated Fund Administrator consists of three core programs: 12 Route 17 North
~ NTAS, the New Transfer-agency System Suite 111
~ E*TAS, Electronic Transfer Agency System Paramus
New Jersey, NJ 07652, USA
~ GRID, Global Reach Interface Daemon
W: www.kogerusa.com
Other programs, such as PTAS, KIT, and KORS available separately, complement the core
competency of Fully Integrated Fund Administrator.

Misys provides integrated, comprehensive solutions that deliver significant results to

over 1,200 financial institutions globally. Our buyside solutions help asset servicers,
asset managers and hedge funds handle the latest complex products, streamline
processes, reduce costs and improve STP. Misys Summit is our award winning, www.misys.com
multi-asset class solution that boasts 18 years OTC derivatives market expertise. tcm.marketing@misys.com
With extensive OTC buyside coverage and the market leading structured products
module, Misys Summit delivers the solution you need for handling the end to end
process for OTC. We also provide a customisable ASP service for fast implementation
and lower costs.

Building on over twenty years of experience in capital markets and cross-asset software
solutions, Murex introduces Mx Asset Manager - a unique cross currency, cross asset fund
management solution capable of handling the full range of products, from plain vanilla to C: Hélène Desbiez
the most complex derivative products. Business Development Manager
Coupled with a high degree of flexibility and customization, Mx Asset Manager T: +33 1 44 05 32 00
features a multifaceted design catering to the needs of both service providers E: helene.desbiez@murex.com
(prime brokers, administrators, asset servicing providers) and direct clients (portfolio W: www.murex.com
managers for mutual, pension or hedge funds, insurance companies).
With so many new challenges presented to buy-side managers when integrating
increasingly-complex derivatives into their portfolios and funds, Mx Asset Manager
represents a strong and reliable ally for dynamic position keeping and multi-dimensional
risk management in a thriving market.

Odyssey Financial Technologies is an industry leader in the global provision of wealth

and asset management solutions and services to the Private Banking, Mass Affluent and
London Office:
Retail Banks as well as Institutional and Fund Managers. Over 200 financial institutions Martin House
in more than 30 countries have chosen Odyssey solutions. Odyssey focuses on providing 5 Martin Lane
a comprehensive range of components for portfolio management (PMS), advisory London EC4R 0DP U.K.
process, customer relationship (CRM), compliance, risk, analytics and Enterprise Data
Management (EDM). The components are deployed on a single scalable wealth and asset T: +44 (0)20 7621 5800
management platform, facilitating the enterprise-wide implementation of solutions F: +44 (0)20 7621 5899
and data management. Founded in Luxembourg in 1995, Odyssey today has offices in
the key financial centers, including London, New York, Singapore, Zurich, Frankfurt, E: info@odyssey-group.com
Brussels, Geneva, Madrid, Toronto and Tokyo. Odyssey’s operational head office and main W: www.odyssey-group.com
development centre is located in Lausanne, Switzerland. Throughout this knowledgeable
network Odyssey employs over 600 professionals.

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InvestorServices
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Journal

peterevans is a leading provider of front to back office solutions for the financial services
sector. With 23 years experience peterevans takes a sophisticated and dynamic approach
to assist customers in reducing costs and witnessing an increase in margins by seamlessly peterevans
replacing costly and restricting legacy platforms. peterevans works in a collaborative New Broad Street House
manner and sees clients as partners to help meet all the demands in today’s marketplace. 35 New Broad Street
The xanite product suite offers a highly configurable, flexible and fully integrated, browser London EC2M 1NH
T: +44 (0) 29 20 402200
based, comprehensive front to back solution that complies with message standardization
E: info@peterevans.com
and settlement harmonization. Deployed as a single application or integrated as W: www.peterevans.com
components into your existing platform. Each of the xanite modules can be delivered via an
ASP or self-hosted. Covering: wealth management, custody corporate actions clearing and
settlement private client and on-line stock broking.

Pirum provides a full suite of automated reconciliation and straight through processing
(STP) services supporting Operations within the global securities finance industry. The
company’s on-line SBLREX service encompasses daily contract T: +44 20 7220 0961
compare, monthly billing comparison, mark-to-market & exposure processing, pending F: +44 20 7220 0977
trade comparison, income claims processing and C: Rupert Perry
custody reconciliation. E: rupert.perry@pirum.com
Subscribers to Pirum’s services significantly increase their operational efficiency and A: Pirum Systems Limited
reduce their risk by using Pirum’s solutions, as staff are able to focus on fixing the 37-39 Lime Street
exceptions instead of using their time to check and process routine business. These London, EC3M 7AY
automated processes are more scalable and risk controlled too, allowing W: www.pirum.com
significantly higher volumes to be managed without corresponding increases in
operations headcount.

Princeton Financial Systems (PFS), a 100% subsidiary of State Street Corporation, is a leading
provider of portfolio management and accounting systems, investment compliance, data For more information, visit Princeton
management, and reporting solutions to the global investment industry. Our solutions are
used worldwide by over 430 leading investment managers, custodians, insurance companies, Financial’s website at www.pfs.com or
pension funds, hedge funds, and banks, which manage combined total assets of over $5 www.pfs.aquin.com.
trillion in more than 40 countries.These include ABP, AEGON, AIG, Allianz Global Investors, T: +1 609-987-2400
BNP Paribas, CaIPERS, CACEIS Investor Services, Citi, Commerzbank, Credit Suisse, HSBC F: +1 609-987-9320
Insurance, Metropolitan Life Insurance, Nationwide, Northwestern Mutual, Prudential, RBS, C: Lorne Whitmore, Vice President,
Société Générale Securities Services, and State Street. MIG21, PFS’s award-winning investment Global Sales & Product Management
compliance and risk monitoring solution, optimizes pre-trade and post-trade compliance E: lwhitmore@pfs.com
checking, the administration of regulatory, prospectus, and internal investment guidelines A: 600 College Road East,
along with the consequent resolution workflows. PFS, headquartered in Princeton (NJ), has Princeton, NJ 08540, USA
offices located throughout the United States, Canada, Australia, Singapore, and China as well W: www.pfs.com, www.pfs.aquin.com
as in United Kingdom, the Netherlands, Luxembourg, France, Germany, and Switzerland.

Founded in 2002, Redi2 Technologies is a leading provider of fee billing solutions to the
global financial services industry. Redi2 offers flexible, feature-rich solutions that help
firms streamline operations, improve cash flow, reduce costs, enhance client service and Redi2 Technologies, Inc.
meet compliance obligations. 1771 Broadway St.
Redi2’s flagship fee billing and revenue management solution Redi2 Revenue Manager Oakland, CA 94612
helps financial professionals more easily manage the fee billing process, including client T: +1 (510) 834-7334
setup, multi-currency fee and accrual calculations, invoice and advice generation, E: info@redi2.com
W: www.redi2.com
accrual reconciliation, adjustments and reversals.
Our open APIs and support for industry-standard relational databases ease integration
with third-party solutions, including accounting, performance measurement and CRM
systems.

Netik’s team have spent the past 25 years perfecting the art of bringing
together market, reference, portfolio accounting, performance and risk data For more information please
from disparate sources into a single version of the truth (SVOTTTM). The result visit: www.netik.com
is a highly scalable and sophisticated business data model that has been or email: marketing@netik.com
designed to process all securities and offers a complete model for traditional
and alternative markets.

SimCorp Dimension is a powerful, comprehensive and truly seamless investment

management system. It can handle NAV and other calculations, with complete related
T: +44 (0)20 7260 1900
accounting, for a huge variety of fund structures and product types, including regional
F: +44 (0)20 7260 1911
specialities.
C: Elizabeth Gee, sales director
SimCorp Dimension has been designed from scratch as an enterprise-wide system, of SimCorp Dimension
handling all aspects of the investment management process and related administration E: elizabeth.gee@simcorp.com
functions, consistently. Data is recorded once into a core database so that reporting is W: www.simcorpdimension.com
made easy, there is no reconciliation of data and no duplication of procedures. A: SimCorp, 100 Wood Street,
-By cutting latency in securities processing, our clients are recognising new efficiencies, London EC2V 7AN
reducing costs and increasing throughput
-By streamlining their customer on-boarding processes, our clients are gaining faster
access to fees, increasing customer satisfaction, gaining greater cross-sell opportunities.

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 THANKS TO OUR INTERNATIONAL NETWORK,
WE STAND BY YOU AS MUCH FOR PERSONALISED
ADVICE AS FOR KNOW-HOW.

“At Société Générale Securities Services, we don’t settle for simply providing technical expertise. More
and more of our clients expect us to fulfil a genuine consulting role. They want to benefit from our industry
analysis and expertise. This is where I step in. I help them to position themselves in this environment, identify
their specific needs and propose simple solutions that will accompany them through the long term.”
Mathilde Guérin, project manager. www.sg-securities-services.com

We stand by you

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