With Asia an ever more important buyer of European Ucits 3 funds, administrators are increasingly using transfer agency platforms to meet the challenges of multiple languages and multiple compliance regulations. By Nick Fitzpatrick
Luxembourg-based fund administrators are having to get to grips with Mandarin, Cantonese, Hindi and a whole range of other Asian languages to support clients that are aiming products at the East.
The reason is that many large fund distributors like Axa, Allianz and ABN Amro view Asian consumers as increasingly important buyers of their European-domiciled Ucits 3 funds. Also, many smaller fund promoters may want to follow the success of Ashmore, a UK fund manager, which, despite being a relatively small institutional firm, managed to raise $1bn from Japanese retail consumers in the past year after launching an emerging markets fund.
But the push into Asia is a significant challenge. Not many distributors will be able to handle application forms written in Mandarin, and with outsourcing in the region virtually non-existent, fund administrators in Luxembourg are looking to fill the void.
Certain administrators are leading the way with their transfer agency platforms. The aim is to allow fund distributors to connect Asian customers straight through to hundreds of underlying funds from various manufacturers in different domiciles.
Lack of automation
In other words, transfer agents want to mirror the European model – but doing this in Asia is not as straightforward as it might seem, given the lack of automation in the region and differences in regulations between countries.
“Europe operates like one country. But Asia most certainly doesn’t,” says Steve Cook, a management consultant at Morse in London.
Distributors want a universal ordering platform, a single portal that allows access to whole families of funds, says Cook.
But the single portal has to be able to deal with the multiple languages of customers on one side, and the multilple compliance requirements of different fund domiciles on the other.
Most forward-thinking transfer agents in Luxembourg are building capability with all this in mind, says Cook.
Mutual Fund Technologies (MFT), the transfer agency arm of fund manager Fidelity, which also offers external services, is one of the gainers. Schroders appointed MFT, its Luxembourg provider, to an Asian transfer agency mandate in February this year. The appointment meant that a local external provider was replaced but that a local presence could still be maintained using MFT.
Gary Janaway, head of operations at Schroders Fund Services (Luxembourg), says: “We use the same system in Asia as we do in Luxembourg but with a local team presence. We found it much easier to pool the resources of the MFT team in Hong Kong with the team in Luxembourg, which is important when it comes to timeline differences between Luxembourg and Asia. The appointment also removed some of the duplications in processes that occurred when we had two different providers.”
A less important though notable advantage of the MFT system was that it is better placed to handle electronic orders.
Janaway says: “Cheques are a common payment method in Asia, particularly from small retail investors and some of the banks. The previous provider was able to process cheques, but we also wanted a system that would better enable electronic payment, which is becoming more common in Asia.”
BNY Mellon Asset Servicing is one of the newest providers to make a push into Asia. In July it announced a dedicated transfer agency facility in Singapore to support clients that distribute investment fund products in the region. BNY Mellon said that the “TA Asian hub has been established to take maximum advantage of fund distribution processing across multiple regions and time zones”.
AIM Global, a division of Invesco Asset Management, is a client. It is using the platform to market its US-dollar money market fund to investors in Asia, including Hong Kong and Singapore. The service allows investors in AIM Global's Dublin-domiciled fund to receive US dollar payments during the working day in the investor’s home market, taking into account local time differences.
Marc Doman, managing director, AIM Global, said: “Having a local transfer agency operating platform significantly improves the attraction of our Dublin-based money market fund to Asian investors. It enables us to provide real-time fund trading and client services during the Asian day as well as ensuring same day US dollar redemption payments in locally held accounts.”
Cook, at Morse, adds: “Increasingly, fund managers are looking to Asia Pacific where Uctis 3 funds are seen as very safe and secure.”
Asia Pacific is, in fact, just part of a much wider challenge facing transfer agents at the moment. The crux of the problem for fund managers that wish to distribute in multi-jurisdictions is the fact that their funds are also domiciled in multi-jurisdictions.
Cook says: “When you look at very large global fund managers, they will have funds in multiple domiciles. Perhaps this is just something they have inherited through acquisitions. It’s not necessarily what they want, but it’s what they’ve got. On top of that, they will use Luxembourg or Dublin as major offshore centres.”
Christophe Lentschat, head of product development and sales at EFA, a fund administration service in Luxembourg, says: “We provide a global order desk. If a client has funds in several jurisdictions we channel the orders through EFA. We’ve seen our clients distribute funds in more countries like South Asia and Eastern Europe.”
RBC Dexia also runs a distribution support service. The bank says the service is a way to enable clients who are fund manufacturers to gain quick and efficient access to new markets or to increase distribution in existing markets.
The key focus of this type of service is to provide an electronic dealing platform for the local buyers of funds, be they intermediaries or institutions, and to make investments into a transition agent’s clients’ funds across the globe.
“The benefit to the fund manufacturer is that the only local requirement to then sell the fund in a new market is the registration and hiring of a sales team. We, in effect, provide all of the operational architecture and indeed a considerable amount of support for registration and negotiation with local distributors,” said an RBC Dexia spokeswoman.
Learning the lingo
The broader focus across markets and instruments by asset managers in recent years has caused certain back and middle office roles that were once lowly administrative functions to emerge as being critical to growth and the handling of scale. Transer agency is no exception. “Transfer agency is not just a middle office activity anymore; it is also a feature of the front office,” says David White, director of client services at Mutual Fund Technologies.
“The front office element is the client-facing area,” he says, referring to sales roles that might necessitate the integration of web and voice technology.
Ray Pepper, head of BNY Mellon Asset Servicing’s transfer agency in the UK, says: “Using e-commerce capabilities we can connect sales forces and branches up to fund manufacturers though a portal on the sales laptop.”
The technology is important. But for deep penetration into Asia, where vast pension and retail assets await managers, language skills will also be critical and this is why outsourcing by foreign managers will increase.
Cook says: “The Taiwanese investor is likely to complete the application form in Mandarin. The process of opening an account is something that cannot be done by a machine.”
© fe October 2007
Transfer agency: Notable mandates, 2007
August – AIM Global & BNY Mellon
BNY Mellon Asset Servicing announced that AIM Global, a division of Invesco Asset Management, is utilising its Asian transfer agency capability to market its US-dollar money market fund to investors in a number of Asian countries, including Hong Kong and Singapore.
July – Trilogy and State Street
State Street announced the expansion of its relationship with Trilogy Global Advisors, a global fund manager with $13bn of assets under management. The extended relationship includes a full range of investment services for Trilogy’s newly launched institutional international funds.
January – Schroders and MFT
Mutual Fund Technologies (MFT), agreed a new five-year contract with Schroders Investment Management (Luxembourg) to continue use of MFT’s GFAS transfer agency platform globally.