September 2009Volume 6 No. 42GBP 25 - UK, ROWUSD 45 - AmericaEUR 35 - EMEAwww.ISJ.tv

Europe - Spanish Custody

Collateral - Longevity Swaps

Asia - Hedge Fund Services, SettlementTHE GLOBAL SECURITIES SERVICES INDUSTRY MAGAZINE

InteractionRisk, liquidity and legacy

in transaction banking

CEO Profi le: Pierre Francotte, EuroclearPanel: Fund Administration in Emerging MarketsShareholders: Corporate Actions

Front Cover Section ISJ42.indd 1 19/10/2009 12:09

Raising the Bar

Front Cover Section ISJ42.indd 2 19/10/2009 12:10

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1-17 ISJ42.indd 1 20/08/2009 15:21

2

Heads up ISJ Investor Services Journal

Editor:Ben Robertsben.roberts@2i.tv

Contributing editor:Anthony Harrington

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Craig McGlashancraig.mcglashan@2i.tv

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ISSN 1744-151X.

P.14 CEO Profi le P.17 Payments P.36 Panel DebateP.30 Custody interview

have been as intriguing as the last two. As the People’s Republic continues to take centre stage, and Asian countries increasingly use each other as trading partners, there is still an argument for the gradual decoupling of the continent from the US and Europe. In this issue, ISJ gains signifi cant insight into key areas of investor services and the middle and back offi ce world. Craig McGlashan fi nds hedge funds already on top of the newest demands seen in the rest of the world, such as third-party administration. Anthony Harrington explores the diffi culty of a pan-Asian settlement, despite the market will to this end, and guest columnists describe their approach to regional demands. Our lead feature sees top service providers and banking

fi gures in payments optimistic about the region, in amongst a wider discussion of legacy systems, new technology and the little known size of the profi ts that banks derive from its transaction banking. Corporate accountability will continue to be a heavily debated issue up to the end of this year, and as the composition of boardrooms change, the issuance and processing of corporate actions is vital. Turn to page 18 to learn of the signifi cant challenges in this space. Challenges abound too in Spain, where the custody market remains heavily weighted towards local providers. On the theme of custody, SEB’s Ulf Noren kindly answers ISJ’s questions about succeeding in new markets. ■ Ben Roberts, Editor

What better place and time for this year’s Sibos conference: in the middle of a cautious global recovery in the region that is leading the world for growth prospects. It has been estimated that the average annualised growth of Asian markets is around the 10% mark. This is as defi ant an estimate as any seen in the second quarter of this year, showing the cumulative effect of confi dence that has allowed the exporting countries – unhampered by the strife of toxic balance sheets and shaky confi dence – to make a signifi cant global statement for the future. Emerging market equities have been a popular stock allocation for US money managers and the region’s IPO levels for this year to date – according to Dealogic - are steaming ahead. Hong Kong sits nicely in the middle of the Western and Eastern worlds that have increasingly converged. For centuries an Asian outpost for European banks and the centre of Pacifi c capitalism along with Japan, few of the twelve years that China has had sovereignty over the region

Editor’s letter

Feel good factor

P.06 News

STATS-SNAP The graph shows the strong rebound made by India’s the Bombay Stock Exchange and National Stock Exchange and forecasts see this trend continuing. 2009 fi gures are already expected to beat 2006 levels.

Month Winner Client Location Assignment Mandate size

August Northern Trust Hermes London Trade management n/a

July RBC Dexia HSBC Bank Australia Sydney International services n/a

July BNP Paribas WestLB Group Hungary/Poland Investor services n/a

Latest mandates

..................................................................................................................................................................................

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Copyright 2009 © Oliver Wyman 11

tive of the early mover advantage BSE and underlines the fact that it still plays an important role in the Indian equity markets. But what is worrying is that when it comes to new business segments such as debt or equity and currency derivatives, BSE is far behind NSE in terms of innovation and marketing. This does not bode well for its standing in the market in the long run.

Figure 5: Market Capitalization of Leading Indian Stock Exchanges

Source: BSE, NSE, Celent

Market Capitalization (US$Billion)

379566

805

1748

1150

900

355528

761

1596

675

1000

2004 2005 2006 2007 2008 2009 E

BSENSE

Ahead of the pack: Market capitalisation of leading Indian stock exchanges (USD billion) SOURCE: BSE, NSE, Celent

1-17 ISJ42.indd 2 19/08/2009 14:24

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4

Contents ISJ Investor Services Journal

Contents

News and mandates The last month of updates in custody, clearing and settlement, securities lending, legal and

compliance and technology.

News analysis -Longevity swapsPlus, one year in brief.

A decade on - CEO ProfileBen Roberts talks to Pierre Francotte, CEO of Euroclear.

Interaction - Transaction bankingInvestment in payment and transcation systems has increased in many global firms. Ben Roberts explores the issues and the risk and regulatory context of this core activity.

Analyse This - Payments - Industry

comment on CLS and standards.

Votes in -Corporate actions - Anthony Harrington highlights the new innovations and contentious issues for financial institutions surrounding shareholder voting.

The quest for pan-Asian settlement - Equities and bondsAn update on the initiatives and challenges to creating a cross-continent settlement entity.

Tough nut to crack - Spanish custody Kimberley Ferguson assesses the custody landscape in Spain and gains insight into structure and regulation.

The custody interview - SEB’s Ulf Noren ISJ asks the head of client relations for sub-custody about the market challenges and expanding into new countries.

Sowing the seeds for hedge growth - Hedge fund services in Asia Craig McGlashan sees growing demand for a wider breadth of services.

ISJ Panel - Fund administration in emerging markets ISJ quizzes three leading companies.

Directory - List of service providers

Sowing the seeds for hedge growth, page 32

06

08

14

24

17

30

36

George Ravich, Fundtech, page 14

In this issue

People

Custody

MEMBER - periodical publishers association

to REnEw youR SuBSCRIPtIon PlEaSE tElEPhonE: +44 (0)20 7299 7700 oR vISIt... www.ISJ.tv

32

Stuart Feffer, panel debate page 36

COVER STORY

Payments Fund administration

COVER STORY

As with all regulation, Misys has been monitoring and analysing SEPA and discussing it with our clients for many years now. To date, the uptake of SEPA solutions is very low - this is not a big surprise, but it is certainly disappointing. Most of Misys’ banking clients are domestic, regional or international operations of large banks. SEPA was devised by the European Payments Council (EPC) as a forerunner to EU’s Payment Services Directive. The EPC is made up of the largest European banks, and many of these have been actively using SEPA as a reason to build large payments processing factories, since payments is a core business for them and they want to offer outsourced services to the smaller banks. Therefore, most European banks have had little to do with SEPA, or as is the case with some Misys clients, it’s taken care of by their head office. I think we are all aware that the problem with the EPC’s approach, agreed with the EU Commission, is that it has not been inclusive of smaller banks, vendors or the users of the payment services. Because of this, plus the fact SEPA is not mandatory, it is based on complex new message standards and it has no hard deadline, it is proving too expensive for most banks, there is no client demand and no regulatory stick - so why bother? The PSD comes into force in November 2009, which is the official regulation from the EU but it is coming very late, is overly complex, with potential variations in each country, and all countries may not even be ready. Considering all this, it is not a surprise that the majority of banks have done very little about SEPA or the PSD.

Barry KislingburySolutions Manager for Payments and Messaging, Misys. n

Dear ISJ

Letter to editor

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12

18

26

40 Colin lunn, hSBC page 32

Interaction

1-17 ISJ42.indd 4 21/08/2009 10:17

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6

News ISJ Investor Services Journal

Legal

Technology

Clearing

Securities Lending

Regulation

fund management and sales, according to Horst Küpker, a Postbank board member responsible for financial markets.

BERMUDA - International financial offshore law firm Conyers, Dill & Pearman supported the alterations to the legal framework surrounding mergers and acquisitions involving Cayman-domiciled companies. The Companies (Amendment) Law, 2009 came into force on 11th May 2009 and sought to introduce simpler and more cost-effective mechanism for mergers and consolidations between domestic companies and between Cayman-based and foreign companies.

MOSCOW – The National Depository Center and the MICEX Settlement House achieved the very first foreign currency Delivery Versus Payment transaction, settled on the 31st July. This was achieved using Euroclear Bank - an international central depository.

The NDC has also adopted an electronic data interchange system with the specialist registrar, Vedeniye Reyestrov Kompaniy, for all their information interactions.

Eurex Clearing, the clearing house, has partnered with the financial technology provider Calypso, for operational support for Eurex Credit Clear- its new central clearing platform for over the counter credit default swaps. The new OTC derivatives clearing service improves market stability on a global scale – enhancing transparency and regulatory reporting as well as reducing systemic risk for the financial market as a whole.

SWIFT and SmartStream have joined to enable financial institutions to communicate with SmartStream’s TLM OnDemand

reconciliation service via SWIFT. Existing SWIFT customers can reuse their SWIFT infrastructure to use SmartStream’s service, reducing transaction breaks, operational risk and time to process transactions, while maximizing their return on investment and minimizing total cost of ownership (TCO).

MOSCOW – VTB Capital, the investment business of VTB Group, has become one of the ‘top 5’ operators in the equity market for the first time on a special index from MICEX, the indices and market data provider. The division also became a leader in bond repo transactions with a RUR 125 billion turnover – a 15-fold increase on June.

LONDON - The International Securities Lending Association (ISLA), the trade body representing lenders and borrowers of securities in the international markets, appointed Kevin McNulty as CEO. This follows the resignation of David Rule to take up a position at the Financial Services Authority. Mr McNulty was formerly a managing director at Barclays Global Investors and a previous chairman of ISLA.

BATS Global Markets, the holding company of BATS Trading and BATS Europe, is to launch a US equity options exchange - BATS Options - in early 2010. Jeromee Johnson, hired by BATS Exchange as vice president of market development in April 2009, has been brought in as an integral part of the operations of the new platform.

Raiffeisen Zentralbank Österreich AG (RZB) has implemented SmartStream’s TLM Corona SWIFTNet E&I solution to decrease operational risk and improve customer service across its payments operations.

Chi-X, the high-speed trading platform, and the Singapore Stock Exchange are to develop and launch the first exchange-backed dark pool in the Asia Pacific region.

The UK’s shadow chancellor, George Osbourne, has postulated that the Bank of England would be given sweeping powers over City institutions under a Conservative UK government. The FSA would effectively be reduced to a consumer protection agency.

The City has reacted angrily to government-supported proposals for greater controls and disclosure over executive pay.

The Walker Report, authored by Sir David Walker, ex-chairman of Morgan Stanley International, recommended caps on executive pay, as well as disclosures of salaries that are over boardroom levels, among other measures.

London bankers claimed such measures would be overly-bureaucratic and a populist move in an anti-bank sentiment.

Plans to readjust US financial regulation are on track and Wall Street banks will not be able to revert to old bad habits despite a return to profits, according to the US Treasury Secretary Tim Geithner last month.

In an interview with the Wall Street Journal, Mr Geithner insisted that a “clean up” of the system has already seen balance sheets shrink, with less leverage and more conservative liquidity cushions.

There have been concerns of “business as usual” within banks on the back of recent profits and a new round of pay incentives so soon after the return of government bail out money. n

For more news, visit www.isj.tv

Fund Administration

LONDON - The Bank of New York Mellon Corporation acquired Insight Investment Management Limited from Lloyds Banking Group plc for GBP235 million.

RBC Dexia Investor Services won a mandate to provide international investor services for HSBC Global Investments, the institutional wealth business of HSBC Bank Australia Limited.

ConvergEX now offers its transition management services to clients of BNP Paribas, following a deal recently revealed by the two companies.

More risk and quant managers are being consulted by colleagues in the wake of the financial crisis, according to a survey by 7city Learning, a financial services training company. Of the alumni of its Certificate in Quantitative Finance (CQF) course, 61% of those working as quant or risk managers were being asked more questions than previously about their validation or an explanation of their techniques.

Thirty-six per cent of respondents felt that risk management was the dominant element of their role.

HSBC and Barclays reported solid results for the first half of the year, backed by their investment banking divisions – while rival Lloyds revealed a large loss. HSBC achieved overall pre-tax earnings of US5 billion, while Barclays Capital achieved a profit of GBP2.9 billion.

KAS Bank N.V. acquired Deutsche Postbank Private Investment Kapitalanlagegesellschaft mbH (PPI), the fund administration business of Deutsche Postbank Group. The sale enables Postbank to concentrate on its core competences of

Custody

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1-17 ISJ42.indd 6 21/08/2009 10:20

1-17 ISJ42.indd 7 20/08/2009 15:22

8

News Analysis ISJ Investor Services Journal BNP Paribas Securities ServicesTHE CLOSER WE ARE, THE BETTER YOU PERFORM

With our precise understanding of each market’s internal workings,you maximise your market and investment opportunities.

At BNP Paribas Securities Services, the closer, the better.

BNP Paribas Securities Services is incorporated in France with Limited Liability and authorised by the French Regulators (CECEI and AMF). BNP Paribas Trust Corporation UKLimited and Investment Fund Services Limited are authorised and regulated by the Financial Services Authority. BNP Paribas Securities Services London Branch is authorised by theCECEI and supervised by the AMF and subject to limited regulation by the Financial Services Authority. Details on the extent of our regulation by the Financial Services Authorityare available from us on request. BNP Paribas Securities Services is also a member of the London Stock Exchange.

securities.bnpparibas.com

ISJ 267x203_30Jan:BP2S Ad 25/2/09 14:06 Page 1

One yearon7th September, 2008: Mortgage lenders Fannie Mae and Freddie Mac are rescued by the US government.

15th September: Lehman Brothers files for bankruptcy. US bank Merrill Lynch is taken over by Bank of America.

17th September: Lloyds TSB announced its USD12 billion take over mortgage lender HBOS, a deal apparently strongly influenced by the UK government.

3rd October: The US House of Representatives passes a USD700 billion government plan to rescue the US financial sector, splitting political opinion and becoming a central issue in the presidential candidate race.

8th October: The UK government announces details of a rescue package for the banking system worth GBP50 billion (USD88 billion). In addition, it offers up to GBP200 billion (USD350 billion) in short-term lending.

13th October: Royal Bank of Scotland (RBS), Lloyds TSB and HBOS receive a total of USD37 billion in taxpayer money, though Barclays seeks to broker a GBP7 billion deal from Abu Dhabi and Qatar to escape government influence. US bank Wachovia is taken over by Well Fargo.

12 months of financial drama...

Longevity swaps: new collateral?To anyone not either an actuary or intimately involved with final salary based pension schemes, longevity is one of those ‘out there’ topics. We all “know” that we tend to be living longer, on average, than previous generations and that many companies with final salary schemes have huge deficits, which means that they don’t have sufficient assets to meet their obligation to pay out pensions for the full life spans of their members. However, for the most part, we tend to think that this deficit has been caused by the global financial equity market meltdown. It has, but longevity creep – the fact that people are living longer, and that the rate at which they are living longer seems to be increasing – is making a very significant contribution to scheme deficits. This realisation is now concerning, both to companies sponsoring final salary schemes and to pension fund trustees - creating interest in the possibility of longevity swaps. Jerome Melcer, a partner with Lane, Clark & Peacock explains that in a longevity swap, the provider, (who will be either an insurance company, a bank or a money market player), takes the risk that the scheme’s members will live longer than a specified average span. In exchange, instead of paying benefits to the members, the scheme pays an equivalent revenue stream to the swap provider and, basically, pays out as much

as it would if all the scheme’s members (specifically those already receiving benefits) lived to an agreed average span. To the extent that they live beyond this span, the provider takes over paying the benefits. The clear benefit here is that the scheme’s liability to members is capped. Effectively, the uncertainty over longevity is ‘swapped’ out of the scheme. Trustees can sleep easy at night knowing that they are not going to have to go cap-in-hand to the sponsor for more funding every time the scheme actuary tells them that longevity has gone up by another year (from an average “lifespan” in retirement of 22 years, say, to 23 years, then 24 years and so on). So where does collateralisation come in? It comes in because of the duration of these swap arrangements. Clearly, if you are writing an indefinite or 60- year longevity swap, there is a risk that your counterparty will not be around to back up their promises. Basically, whoever is “out the money” in the swap arrangement (either the pension scheme or the swap provider), puts up collateral to the value of the longevity swap based on current longevity expectations. The collateral will be a mixture, generally, of cash, government bonds and possibly some corporate investment grade bonds. However, one of the difficulties for the emerging market of longevity swaps is the absence of any market making mechanism to set a

price on longevity. It can’t be marked-to-market on a daily basis, for example, and there is scope for huge disagreements between the scheme actuary and the swap provider as to what the scheme’s “actual” (ie, currently estimated) longevity position really is. The scheme actuary is responsible for giving the trustees a view on longevity. But the swap provider will be working off its own model of longevity, based on work it has done on mortality statistics refined by post codes, work types etc. What both sides need is an agreed way, in advance, of resolving any potential conflict in the scale of collateral that needs to be put up. So far there is some evidence from the few deals done to date that this agreement is hard to reach. Moreover, the issue of who is going to manage the collateralisation of the deal is something the pensions industry and the parties involved have not yet solved, even though it looks to be a classic for tri-party collateral management. In fact, as Olivier Grimonpont, Director of Collateral Services at Euroclear points out, there is no necessity for a collateralised longevity swap to be put into the hands of a tri-party manager from day one. Given the fact that there is no mechanism (or requirement) to mark to market a longevity swap on a day to day basis, the collateral will probably only need to reflect changed realities in the longevity market after a few years. It will be sufficiently timely at that stage for the parties to seek the services of a triparty agent, he suggests. n

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Will it be ‘love actuary’ for this little-covered financial product?

1-17 ISJ42.indd 8 20/08/2009 15:22

BNP Paribas Securities ServicesTHE CLOSER WE ARE, THE BETTER YOU PERFORM

With our precise understanding of each market’s internal workings,you maximise your market and investment opportunities.

At BNP Paribas Securities Services, the closer, the better.

BNP Paribas Securities Services is incorporated in France with Limited Liability and authorised by the French Regulators (CECEI and AMF). BNP Paribas Trust Corporation UKLimited and Investment Fund Services Limited are authorised and regulated by the Financial Services Authority. BNP Paribas Securities Services London Branch is authorised by theCECEI and supervised by the AMF and subject to limited regulation by the Financial Services Authority. Details on the extent of our regulation by the Financial Services Authorityare available from us on request. BNP Paribas Securities Services is also a member of the London Stock Exchange.

securities.bnpparibas.com

ISJ 267x203_30Jan:BP2S Ad 25/2/09 14:06 Page 1

1-17 ISJ42.indd 9 20/08/2009 15:22

10

News Analysis ISJ Investor Services Journal

The issue of flash trading and dark pools of liquidity have come to the fore of late, with the US Securities and Exchange Commission revealing it was considering banning the former and was investigating the latter. US senator Charles Schumer even said that if the SEC did not ban flash orders he would introduce legislation to outlaw the technique. But experts have warned that any new regulations must be carefully considered. In the UK, reports had suggested that the Financial Services Authority was also conducting a review of the practices, which rely on supercomputers to gain a trading advantage. An FSA spokesperson denied that an “investigation” was taking place, but added: “As part of our role as a regulator and supervisor of the exchanges we look at a range of issues in the equities market, including high frequency trading.” So what are flash trading and dark pools? Flash trading involves members of exchanges buying and selling data on trades milliseconds before the information is made public. By using sophisticated computer software, these traders are able to gain an advantage on their rivals by making the trades themselves. Additionally, some exchanges can block their competitors by flashing orders to traders milliseconds before they become available to other traders. Dark pools, on the other hand, refer to large systems where buyers and sellers can be matched up without the trading data falling into the public domain.

But apart from the possibility of creating a two-tier system of trading, with those who have the technology needed for these practices at the top and everyone else at the bottom, what else might regulators be worried about? “One of the concerns with respect to flash orders and indications of interest is that the traders, through their strategies, have the opportunity to affect riskless transactions because sometimes the markets

are locked or they’re crossed and so they can get the rebates without exposing themselves to any risk,” says Edward Pittman, Counsel in the financial services group at law firm Dechert. “So they generate transactions without any risk and theoretically it’s harming the marketplace.” Adam Sussman, Director of Research at TABB Group, the financial markets research and advisory firm, has been looking into the various practices and adds that many brokerage firms have been one step ahead of the regulators and have

Flash in the pan?

It’s true. Money makes the world go round. After

all, where would your customers be if you were

unable to transfer their payments quickly and

securely to the relevant bank accounts? In order

to service your customers within SEPA, you will

need suffi cient reach within Europe. Furthermore,

you want your total costs to remain as low as

possible. You therefore need a processor who can

fulfi l these requirements. Equens can do just that,

and more. We offer a variety of SEPA solutions

and also facilitate global payment services, based

on the International Payments Framework (IPF).

We provide full reach within Europe, and we have

the scale to offer you highly competitive rates. In

other words, we can make your money go round –

in Europe, and beyond. www.equens.com

nothing

equals

Money makes the world go round.

Who makes your money go round?

EQ9041_203x267mm+3.indd 1 24-07-2009 09:28:04

24th November, 2008: The UK government cuts VAT from 17.5% to 15%, a move panned by critics.

25th November, 2008: The US Federal Reserve announces it will inject another USD800 billion into the economy.

19th December, 2008: USD17.4 billion of the USD700 billion is given to the ‘Big Three’ US carmakers: General Motors, Ford and Chrysler.

23rd January, 2009: The UK officially enters a recession as fourth quarter GDP falls by 1.5%.

17th February, 2009: Barack Obama approves a USD787 billion economic stimulus plan.

12th June: BlackRock buys Barclays Global Investors (BGI) for USD13.5 billion, making it the world’s biggest money manager. The deal included the highly successful iShares arm, which a few months before was to be purchased by CVC Partners.

17th June: The US government announces a major reform of banking regulation to prevent future financial crises.

14th July: Goldman Sachs reports net profit of USD3.44 billion for April to June, exceeding forecasts. The issue of executive pay again hits the agenda.

3rd August: Barclays announces an 8% rise in first-half profits, boosted by its investment banking division.

17th August: US Treasury Secretary Tim Geithner claims the plans to reform the financial sector are on track and there will be no reversion to old bad habits among Wall Street firms, despite new profits. n

The regulators get tough on two influential liquidity mechanisms: flash trading and dark pools.

actually built in anti-gaming technology to combat strategies which use flash trading and dark pools. However, he does feel that the SEC will bring in new regulation on the techniques – but warns that they should tread carefully. “I think they will ban exchanges from implementing the functionality, but I’m not convinced that they will ban it throughout the entire market structure because there are other pieces of functionality that are similar to flash trading,” Sussman explains, adding that “all sorts of unintended consequences could occur” if the rules are not worded correctly. “That’s why they need to look at it across the board and come down with a ruling that doesn’t just address flash trading but also issues of indications of interest and how order information is communicated throughout the industry,” he says. “They must be very specific about firm orders versus non-firm orders and closed networks versus exchanges where information is available to everybody to participate.” While flash trading and dark pools continue to cause controversy, it seems unlikely that the issue will be resolved any time soon. In mid-August, Singapore and Chi-X Global announced plans to launch a dark pool system for investors trading stocks in Hong Kong, Japan, Australia and Singapore, with the venture expected to begin operations in the first half of next year. The future of high frequency trading may be as dark as the pools of liquidity themselves. n

“One concern is that traders, through their strategies, have the opportunity to affect riskless transactions ”

01 11 21 31 4112 32 4203 13 23 33 4304 14 34 4405 15 25 35 4516 26 36 4607 17 27 37 4708 18 28 38 4809 19 29 3910 20 4002 06 22 24 30

1-17 ISJ42.indd 10 19/08/2009 11:22

It’s true. Money makes the world go round. After

all, where would your customers be if you were

unable to transfer their payments quickly and

securely to the relevant bank accounts? In order

to service your customers within SEPA, you will

need suffi cient reach within Europe. Furthermore,

you want your total costs to remain as low as

possible. You therefore need a processor who can

fulfi l these requirements. Equens can do just that,

and more. We offer a variety of SEPA solutions

and also facilitate global payment services, based

on the International Payments Framework (IPF).

We provide full reach within Europe, and we have

the scale to offer you highly competitive rates. In

other words, we can make your money go round –

in Europe, and beyond. www.equens.com

nothing

equals

Money makes the world go round.

Who makes your money go round?

EQ9041_203x267mm+3.indd 1 24-07-2009 09:28:041-17 ISJ42.indd 11 20/08/2009 15:22

12

ISJ Investor Services JournalCEO Profile

13

Pierre Francotte will step down from the role of CEO at Euroclear in a few months after 10 years at the helm. The last year, as with the heads of many industry leading firms, he believes has been among the most dramatic. Of significance, it has been a time to not only demonstrate the proven resilience of post-trade operations during a financial crisis, but also an opportunity to deliver innovation. In particular, there is the ongoing unification of the processing platforms operated by the Euroclear group central securities depositories (CSDs) – including Euroclear Bank and the group’s national CSDs – to create a single platform for seven EU domestic markets including the UK, Ireland, the Euronext markets and the Nordics for bonds, equities and other asset classes. It began in 2006 with the Single Settlement Engine (SSE), a consolidation of the current group (I)CSD core settlement applications, which already improved settlement efficiency. Using the SSE as its foundation, Euroclear delivered the Euroclear Settlement of Euronext-zone Securities (ESES) system in January 2009, which is effectively a single platform for the Belgian, Dutch and French markets. The Single Platform programme will be completed in 2011 at which time the Finnish and Swedish markets will migrate immediately thereafter. The Single Platform harmonises market practices across the seven CSD markets and provides a single access point to both the national and international depositories of the group. One particular benefit of the Single Platform is that customers will have access to their entire pool of assets they safekeep with Euroclear, which will be very useful when collateralising trade exposures across markets. Francotte points out that the explosion in derivatives, such as credit default swaps, has made such access to collateral vital. “There is a desire on the part of clients - encouraged by the authorities - to be able to use the assets they safekeep in Euroclear to collateralise exposures arising from as many types of transactions as possible, including derivatives, even though derivatives transactions settle outside

A decade onPierre Francotte, CEO of Euroclear, talks to Ben Roberts about the resilience of post-trade systems and making decisions in a crisis.

Euroclear.” It means that Euroclear Bank customers, for example, collectively have access to as much as EUR 9 trillion of assets held in Euroclear Bank today; the pooling of assets across the entire Euroclear group would increase the pool of collateral to around EUR18 trillion. Francotte adds that the increased desire to collateralise transactions is due to the shift from unsecured to secured transactions, largely as a result of the recent financial crisis. Calls from regulators, such as the SEC, to trade derivatives on exchanges and clear these trades through a single central counterparty, will result in additional demand for collateral solutions. “When trades are cleared and netted through a CCP, the net exposure is reduced, but the CCP still requires the exposure to be collateralised. As we already have in place for equity trades, we have the prospect of working with CCPs for derivatives trades, helping clients collateralise exposures in a straight-through processing fashion from their pool of assets held anywhere within the

Euroclear group. Francotte explains: “We are firm believers in seamless interoperability between CCPs and CSDs - or an ICSD like Euroclear Bank. (I)CSDs should be able to freely compete for settlement and collateral management business opportunities by offering the market a choice of provider, particularly in markets where there are no alternatives today. This is the spirit of the European Commission’s Code of Conduct for Clearing and Settlement.” In addition to the benefits of choice and competition, Francotte points out the efficiency and business growth potential advantages too. By providing an environment where clients can centralise their settlement, custody and collateral management needs in the venue(s) of their choice, volume discounts will mean lower unit costs, fewer but larger asset pools will mean greater collateral optimisation and opportunities for clients to rationalise their own back offices will mean internal cost savings. As a result, he says, firms can trade more, and more cost effectively. Francotte explains that a familiar brace of subjects are top priorities during client meetings: reducing risks and reducing costs. He says there are two immediate ways that Euroclear tackles these issues: first, by continuing to provide a risk-averse environment in which clients can process their transactions and by continuing to reduce tariffs to make post-trade services cheaper; second, by delivering the Single Platform to reduce market fragmentation and help eliminate the high costs and risks of cross-border transaction processing. The move to process all custody-related transactions, such as corporate actions, across Euroclear’s markets on the Single Platform is due to be implemented by the end of 2010 – the next milestone in Euroclear’s programme, which is more than 80% completed. “It’s an objective worth pursuing,” he begins. “Trading firms need to invest in different technologies, maintain relationships with multiple intermediaries and market infrastructure service providers in order to access different

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ISJ Investor Services Journal CEO Profile

13

markets. “The more we can rationalise, streamline and harmonise access to multiple markets, the more business they will be able to transact while saving money in their back offices.” Talk of market-practice harmonisation and post-trade processing is a far cry from Francotte’s career origins – a Belgium native - who first practiced as a lawyer. In 1993, while working in the US for the International Monetary Fund, Francotte was head-hunted by JP Morgan to work in a legal capacity at Euroclear – then still operated by the New York bank - in Brussels. He recalls that he did not expect to be able to fulfil his dream of a career with an international scope by returning to his home country, and he had not previously heard of Euroclear and its role in the international capital markets. However, he says that it quickly became apparent that Euroclear was one of the “jewels in the crown” of JP Morgan, with an unusually diverse team of employees taking on different roles at Euroclear during their careers. “Euroclear was independent from the activities of JP Morgan, and rightly so. One of the most attractive features at Euroclear was the opportunity accorded to senior and mid-level people to rotate jobs and learn new skills within the same company.” Francotte also appreciates Euroclear’s user ownership and governance, which allows Euroclear to invest in business safeguards that do not necessarily generate short-term profits. For example, its business continuity arrangements are second to none. Francotte reveals that - purely coincidentally – Euroclear simulated a ‘stress test’ scenario where one of its major liquidity providers defaulted, just one month before the collapse of Lehman Brothers in mid-2008. This type of rehearsal helped Euroclear manage the crisis with no market disruption and no losses on its exposure to Lehman. “The theme of the test was ‘One of our biggest counterparties goes bust – what do we do?’ As we went through the lessons and exercises, we took careful note of the procedures we would improve for the next time we do an exercise like this. It was very useful that we had done this when the Lehman crisis occurred.” Francotte says he is proud of how well his colleagues handled the event, continuing to operate the rest of the business as normal, despite working “days and nights” in the wake of the collapse. “Decisions about how to handle a crisis

like Lehmans are typically not taken by the CEO; they need to be taken by the people who are closely involved with the day-to-day business. Obviously, there is no time to properly train them at the start of a crisis, so being well prepared in advance is vital. That’s one of the major strengths of Euroclear – depth of management and quality of people.” He says that the authorities publicly acknowledged the strong performance of the post-trade systems during the crisis. “They – including the central banks – recognised the operational resilience of the payment and securities infrastructures in 2008. We are what has been called in another context ‘the dog that didn’t bark’, because if we had had problems processing payment or securities transactions, the markets would have been unable to function normally. And, that did not happen.” The legacy of 2008 can be remembered as a period of significant volatility, for example, transactions in the UK alone leaped from around 300,000 transactions a day on average, with peaks of around 600,000, to a spike of 1.6 million transactions in one day. He says this systems resilience challenge had been met without issue due to the fact that Euroclear had decided to invest in systems capacity enhancements well before the crisis ensued. The introduction and growth of multi-lateral trading facilities and new CCPs were other significant developments for the post-trade providers to manage, having an impact on both trading and settlement volumes. Francotte believes that despite the proliferation of MTFs, “I’m not convinced there’s room for so many in Europe. The MTFs are forcing the exchanges to rethink their business models and change their pricing structures. As always, liquidity is an important determinant of success at the trading level, so price is not the only factor.” When asked to consider the biggest achievement of the Euroclear group during his time in charge, Francotte points to the firm’s ability to integrate two of the three biggest securities markets in Europe: the French and the UK markets. None of the other market infrastructures – exchanges or CCPs – have achieved the same level of integration, he adds. “The hard part of a merger or acquisition is the integration process, but that’s where the true value is derived. It is partly because of this ability that I believe Euroclear will remain one of the most

important drivers of securities market integration in Europe and perhaps beyond. “It’s a challenge to work on so many different initiatives at the same time, but with a strong discipline of execution, good results emerge. The CEO of a company is like the conductor of an orchestra, leading teams of experts towards a harmonious result.” n

“The more we can rationalise, streamline and harmonise access to multiple markets, the more business trading firms will be able to transact while saving money in their back offices”

Biography- Chief Executive Officer and Chair-man of the Management Committee of Euroclear SA/NV (2005 – present)- Member of the Board of Directors, Euroclear SA/NV (2009)- First Chief Executive Officer of Euroclear Bank upon its creation (2001-2005).- Chief Operating Officer and Gen-eral Manager (2000-2001) - Managing Director and head of the Transaction Processing division 1997-2000)- Managing Director and head of the Legal division (1994-1997) - Joined Euroclear’s Legal division in 1993- Assistant General Counsel at the International Monetary Fund (1982-1993. - Bachelor’s degree in Law and a Master’s degree in Financial and Economic Law from the Université Libre de Bruxelles (Belgium). - Diploma in Comparative Legal Studies from Cambridge University (UK).

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ISJ Investor Services JournalPayments

Pays to invest

Global capabilitiesfor a changing world

• Securities processing solutions • Clearing and outsourcing• Electronic proxy voting

www.broadridge.com • info@broadridge.com

Telephone: +44 20 7551 3000

©2009 Broadridge Financial Solutions, Inc. Broadridge and the Broadridge logo are registered trademarks of Broadridge Financial Solutions, Inc.

Some aspects of finance are so fundamental they are typically overlooked. The interbank lending market only really showed its true influence on the activities of financial institutions – and wider economies - when it came to a near standstill from mid 2007. But it operates as part of perhaps the most fundamental investor service, perhaps the core of banking itself historically: payments transactions. Compared to the faster changing arms of investment banking and commercial banking, payments and transaction banking is the pragmatic machine of money movement, though many would still be surprised by the revenues generated. HSBC last year saw revenues of more than USD9 billion in transaction banking, according to Andrew Long, group general manager and head of global transaction banking at the firm. But it is an area of a bank in which internal systems typically change less frequently, and if delivery is on time it is a key functions that is taken for granted. But as George Ravich, EVP at payments technology developer Fundtech points out to ISJ, the ripple effect of the credit crisis has made the status of payments and transaction banking climb the priority list for banks’ infrastructure spend. In particular, issues of risk, security, high transaction volumes, liquidity management – subjects that have dominated discussions in the more eye-catching areas of trading and portfolio management – have their implication for payments operations, and more CFOs are taking note. A key issue is the disparate nature of payments within the banks. Multiple systems can exist, often from very different decades, overlapping with each other and creating the kind of ‘silos’ also present in the post-trade processing of different asset classes. It can mean high maintenance cost and decreasing efficiency. Fundtech’s answer to the market has been the creation of a centralised payments ‘hub’ by which all types of payments – from custodian arms

and asset management through to more general corporate clients and retail – can be processed and distributed. “The credit crisis certainly has made it more important [to] move towards a consolidated payments hub where a

bank could see its risk across all kinds of payments,” says Ravich. “Banks with a payments hubs can see their risk better, their risk-by-customer better and manage

their liquidity better.” Fundtech’s key product to enable this is called Global PAYPlus, which features a core engine from which a variety of payments services, including mass payments and high-value payments, can be installed. The framework for these consolidated payment services is achieved through what it has called a service-oriented architecture (SOA). “SOA relates to how easy it is to deploy different functionality and how they can interoperate,” explains Ravich. He adds that this deployment may vary depending on the size of the institutions. “Like any situation, bigger banks will have more money to spend on development they’re usually the ones who will invest sooner in SOA and hubs. The smaller banks would need to use this technology, as it will not only provide benefits to the banks but also the end customer. The ease of sending a bank a file saying ‘take care of my payments’ - rather than having to have different systems for payments.” Andrew Long at HSBC adds that the bank has been reducing its multiple payment platforms two key payments systems – high and low value payments – and there is still discussion as to whether

Transaction banking has climbed the agenda for banks, though legacy sys-tems and stop-start legislation need to be addressed, finds Ben Roberts.

“The credit crisis has certainly made it more important to move to a consolidated payments hub”

George Ravich,Fundtech

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ISJ Investor Services Journal Payments

Global capabilitiesfor a changing world

• Securities processing solutions • Clearing and outsourcing• Electronic proxy voting

www.broadridge.com • info@broadridge.com

Telephone: +44 20 7551 3000

©2009 Broadridge Financial Solutions, Inc. Broadridge and the Broadridge logo are registered trademarks of Broadridge Financial Solutions, Inc.

about 80% of the high value traffic will be on the systems, with an even higher percentage 12 months later. “These new systems increase straight through processing rates, improve data handling rates and facilitate data reconciliation and forecasting,” he says. “But they’re not cheap, that’s why the newer players that want to come into this space might not be able to afford to be that sophisticated.” Distra is a Sydney based provider of payments solutions that among other things offers a unified framework so that banks can replace the different payment systems that have been built and added over decades. Mike Aston, Distra’s CEO, explained to ISJ that each of these legacy systems – themselves created to facilitate best performance for clients – have limitations, particularly as they only service one type of payment, but because they have become so “mission critical” to daily operations there has been a tendency to cling to them. In the past, he adds, banks and major parties ran the payment networks. If there were a specific operational issue, they’d find their own private solution. But over the last few years, he explains, “regulators

have jumped into the ring and created situations in which those comfortable arrangements no longer apply. Plus, there’s less money in the pool anyway in terms of fees if firms are reducing interchange fees.” Aston says the continued use of siloed systems hampers the ability to assess risk and liquidity controls. Traditional ‘batch’ processing systems entailed a kind of black box effect: payment information would go in at the beginning and banks would not know their net position until the batch process had finished. “Any traditional ACH system would not know the settlement position,” he explains, “so in liquidity management terms therefore, they would have to assume that today would be no different to today or the same day last week.” This lack of feedback as to the progress and overall liquidity status outs firms at a disadvantage. Long at HSBC says that liquidity management has climbed the agenda for banks. “There is increased focus on cash and the availability of cash – where your cash sits in the transaction flows of a customer has always been important,” he says. “In the past, making payments and

receiving collections has been the focus, it was a processing ‘play’ with liquidity second.” The effect of lower economic activity the collapse of Lehman Brothers and the difficulty suffered by some financial institutions spurred this increased focus on systemic and corporate liquidity, he adds, leading to increased scrutiny from regulators. “One of the drivers of this is that working capital has reduced as an industry, and a key reason for this is the implication of the Basel II regulation. Basel II – because the way the cycle has worked – has meant banks need to put up more capital in a declining environment for the same level of assets. If you’re not making money you can’t raise that capital internally and raising externally has become harder. Banks have had to reduce their need for capital by shrinking the balance sheet. So it’s easier to cut a short-term working capital loan than a 10-year property loan.” To better assess the status of balance sheets and liquidity levels for customers Aston says Distra has attempted to provide a solution - chiefly embodied in its UK Faster Payments Service - whereby firms

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ISJ Investor Services JournalPayments

can instead constantly monitor how much is owed to which party. “In Faster Payments we’re providing a real time view of net settlement positions between the parties, something traditionally not available.” The first step to tackling the problem of disparate systems, he says, is to realise that the different payments themselves are not really that different. The payments may be different lengths, he says, but if you build the systems right operators can overcome these issues. The Single Euro Payments System (SEPA), the staggered legislation for a pan-European marketplace that would level the cost of cross-border electronic payments, is one such form of transaction that a payment hub can incorporate, rather than developing specific new technology. SEPA itself is still a work-in-progress. In January 2008 banks and technology providers were preparing for SEPA credit transfers. The long awaited follow up – SEPA Direct Debit – is scheduled for the beginning of November. Some smaller clients may be tempted to outsource their payments processing, another aspect that Ravich says Fundtech is working on with clients and another area more commonly associated with other investor services. “There are a number of facilities already – we’re very involved in outsourcing for a smaller bank that does not want to invest in the technology needed. “They will more readily want to outsource to a specialist to someone who

has a payments hub available to a service bureau basis. So we see service bureaux growing more going forward.” Colin Kerr, industry manager, core banking and payments, Worldwide Financial Services at Microsoft Corporation, says that the upcoming legislation has been one of the drivers for the increase in budget for upgrades to banks’ payments systems. “The projects are fairly long running and very much driven by regulation as well. If you think about all the events happening in Europe with SEPA and UK Faster Payments they have almost been regulatory drivers as much as business drivers. So treasury services have not really slowed considerably.” He adds that new regulation gives firms the opportunity to “rethink” some of the technology architecture. Worldwide Financial Services does not build applications like Fundtech. Instead a technology provider would create the application and Microsoft underpins it with both its own technology stack along with the necessary integration layer which can provide a framework for connecting those applications together in the bank offices and linking it to the various clearing and settlement systems. The primary service is called BIZTALK and is certified by SWIFT and can connect to SWIFT through AllianceGateway. Though some e-banking technology firms such as Equens and CoCoNet seem to be relishing the business opportunity, some see the next stage – and SEPA itself - as a significant challenge to smaller firms. Barry Kislingbury, solutions manager for payments and messaging at Misys, who writes in this issue of ISJ, points out that SEPA benefits the largest banks and may have excluded the smaller majority of institutions. He says that the European Payments Council, the consortium of the biggest European banks that created the legislation, were able to use SEPA to build large payments processing factories to take advantage of their scale and outsourcing offering to smaller firms. The EPC’s approach, he says, “has not been inclusive of smaller banks, vendors or the users of the payment services. Because of this, plus the fact SEPA is not mandatory, it is based on complex new message standards and it has no hard deadline, it is proving too expensive for the majority of banks.” This, along with the emphasis on “complex new messaging standards” and

“The reality is that modern technology means that it is much lower cost - you don’t need complex systems, you don’t need expensive people to install and run it”

Mike Aston, Distra

the lack of set deadline, means there is little momentum for the legislation on the part of market practitioners. Mike Aston at Distra takes a different view to the claim that SEPA’s creation solely benefited the large organisations, and argues that new technology – correctly deployed, helps pluralise the market. “It’s an argument that to some extent is somewhat believable and has ‘legs’, but there are a lot of myths existing in this whole area - that to do anything in payments is extremely expensive and only the largest organisations can do that. “That is legacy thinking to a large extent… because your required things, like main frame computers - together with a lot of expensive proprietary software - [it seemed that] unless you really had a significant volume, it was very difficult to get a business case together, and thus the tendency for the smaller organisations to outsource. The reality is that modern technology means that it’s much lower cost - you don’t need complex systems, you don’t need highly expensive people to help you install and run it.” SEPA remains a quintessentially European initiative, facilitated by a number of countries with a single currency and a similar level of development. Asia, with one currency per county and a greater disparity between country developments, has a different outlook. But at time of interview, market practitioners were looking forward to the Sibos conference in Hong Kong, and some western payments service providers have had some recent success in the region. Fundtech, forexample, in July sold its GlobalCASH Plus system to United Overseas Bank, Thailand’s leading bank. “Asia’s an interesting market, says Aston. “In some respects its very different to Europe in that rather than one unified region it’s made up of a lot of different relationships and different alliances. I think a SEPA-like environment in Asia would be difficult to imagine. Certainly the idea of a greater efficiency and standardisation is something those markets understand well. “The other thing is they do look at the developments, one of the things we’re seeing is a keen interest in real time settlement, and they do look at what’s happening in the UK with faster payments. “We see other countries, particularly in Asia, look at it as something instinctive and intuitive – why wouldn’t you settle something in real time if you could?” n

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ISJ Investor Services Journal Pension Funds

Analyse This: payments

Lehman Brothers’ collapse last year and the financial crisis have highlighted the systemic risks in the business of settlement of complex financial transactions. At the same time, the business is not getting any simpler. More asset classes are becoming part of the trading mix and, with them, the domain of settlement schemes is becoming more and more complex and risk prone.There has therefore never been a better time for firms to seek out the stability and efficiency of systems designed to mitigate the risks of participating in CLS. Squashing Settlement RiskIn addition to removing settlement risk, CLS offers many operational and liquidity benefits, leading to significant cost savings. For example, CLS members base their daily funding requirements on a multi-lateral net position, rather than gross transaction-by-transaction funding, which reduces necessary daily funding by 95%. Accordingly, CLS members have to fund less than USD50 billion a day for every USD1 trillion of value settled. CLS members also enjoy the benefits of straight-through processing, lowered payment volumes and fewer failed settlements. Similar benefits can be offered by a settlement member to its third parties through their CLS back office solutions. A comprehensive CLS back office will offer Service Level Agreements with several payment schedules and funding options that can dynamically execute best practice STP rules that meet the needs and risk profile of a particular CLS third party.Get More Out of CLS: Key Considerations- Offer third-party services - Streamline risk management- Improve compliance- Participate in a growing community of trust- Enhance treasury functions - Optimise central bank relationships

What are the benefits of continuous link settle-ment? Moti

Porath, executive vice president, business de-velopment, Fundtech

This is actually a fair question. In fact, it can be said that the banking industry has always had standards, and that the last thing it needs is yet more. But the reality is that the type of standards employed to date, particularly in the area of payments processing, have been generally designed to be an enabler of communication among industry participants – but less so a model for how a bank could or should operate. Certainly the formation of standards at the transactional level is important, as evidenced by the initiatives mandated by the Single Euro Payments Area (SEPA) and the development of ISO20022, but the primary purpose is to allow structure and

Why does the banking in-dustry need standards? Colin Kerr, Industry

Manager, Payments and Core Banking World-wide Financial Services, Microsoft Corp.

- Greater operational efficiency - Expand into new asset classes- Centralise cross-border trading activity The best way to take advantage of all the benefits CLS has to offer is through a dedicated back office CLS system that is optimized to fully exploit its capabilities. Sophisticated vendor products installed in-house to connect to CLS, for example, let institutions use liquidity and other tools available through CLS to engage in cutting-edge strategies, such as ring-fencing, to better understand and manage their positions. In selecting a vendor product, banks will also gain greatly in the implementation expertise of their new partner for their CLS project. They immediately gain the insights and knowledge acquired during the experiences of other CLS projects. This gives the bank confidence they will be entering into CLS operations in the most efficient and cost effective manner. n

efficiency for the exchange of data. Beyond that, perhaps there are additional reasons why industry-wide standards, or models, are necessary for the architectural renewal of financial institutions. Banks face a myriad of internal applications and systems that have been developed over the past 30 to 35 years and spread across different technology platforms. These systems were often implemented to fulfil a new product need, and few of these systems resulted in the replacement of older systems. As a result, they were integrated without regard to enterprise architecture in an ad-hoc manner. Each of those systems processes banking transactions in different ways, using different formats, and requires different levels of support by auxiliary processes, such as compliance screening. Mergers, acquisitions, and different national banking schemes, further complicate matters - it is easy to see how the environment has become quite unmanageable, and potentially unreliable. For these reasons, banks seek a blueprint for developing an architecture model that will enable them to gradually replace components of their current IT infrastructures over time as business cases permit. Developing standards that improve interoperability and reduce costs must be viewed as a major enabler of efficiencies. The work of BIAN (Banking Industry Architecture Network www.bian.org) aims to address this challenge, and is complementary to the message level specifications for ISO20022. BIAN recognises that although no two banks are the same, the development of industry architecture models and standards for specific banking services can provide this foundational blueprint. Adopting these models will enable banks to implement a consistent service oriented architecture (SOA) across all technology platforms, whether they decide to build or buy software components. Leveraging architecture and message-based standards will enable banks to become more efficient via streamlined integration of systems and processes. As a result, the delivery of such standards will help the banking industry address the key market imperative to drive cost reductions through greater efficiencies and organisational flexibility. n

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very clear picture of the issues that the client might have with that particular company. “The kind of thing we highlight might be the issue of the separation of chairman and chief executive roles, in companies where the two roles are combined in a single individual. The options for the client, if they object to this and are looking to improve governance in their holdings, might be to vote against the appointment of the individual concerned, or to take an even stronger line and oppose the approval of the report and accounts,” Hewitt says. Undoubtedly one of the hottest voting topics at the moment is the issue of executive and Board remuneration and bonuses, particularly in the financial services sector. “Shareholders here have the obvious tool of the remuneration report, which has to go to a shareholder vote, and they also have an advisory vote on the remuneration practices and structures,” Hewitt says. In addition, there is the election of directors involved with the remuneration committee, particularly if the chairman of the remuneration committee is up for re-election. Risk management is another hot topic right now, particularly if there are links with how executives below board level are incentivised to deliver performance. “It is becoming increasingly clear that investors are taking an interest in the internal controls within a company, so Board responsibility for internal control and the individual or individuals on the Board responsible for overseeing this could become the focus of investor concern with respect to their re-election,” Hewitt says. All of this makes for a very complex picture. However, Manifest stays clear of one major area of shareholder interest and that is M&A activity. “These are essentially financial investment decisions although there are inevitably corporate governance issues bound up with them. One thinks in particular about the issue of which directors in the two Boards will make up the new Board. But on M&A work generally, when it comes to the voting decision at the AGM or an Extraordinary General Meeting, we take the view as a voting agency that this is an area for the

Votes are in Corporate actions remain a significant pro-cessing task, finds Anthony Harrington.

There is no doubt that the administration of corporate events is one the most demanding responsibilities for any custodian to deal with. There are many facets and aspects to dealing accurately with custody events on behalf of beneficial owners. Accessing corporate actions information off, say, a real time feed from a provider like SWIFT, is only the first part of the challenge Providing a full service for beneficial owners involves adding value across a number of fronts. The tasks involved range from switching dividends from a pool of domestic and international securities to a common currency to ensuring that all holders have the chance to exercise their full voting rights on all the securities they own. Paul Hewitt is business development Manager at Manifest, which specialises in proxy voting. As he explains, processing voting instructions for clients is probably the most demanding of all the corporate actions to which an administrator has to react. Manifest’s client base are fund managers, pension funds and some sovereign wealth funds. Their clients, by the nature of their activities, hold large equity portfolios and Manifest provides a voting platform which allows them to specify their voting instructions, with the service acting as the back office instruction fulfilment operation. That is easy to say, but as Hewitt explains, proxy voting is tough to stay on top of in practice without a very sophisticated electronic platform. Moreover, institutional fund managers are busy folk. They can’t spend time pondering which way they want to vote across a share portfolio that might contain anything up to 200 or more equities per fund and multiple funds. The way it works in practice, Hewitt says, is that his fund manager clients will specify their voting policies, based on their reading of their end clients’ preferences and their own concerns as large investors. Manifest generates bespoke voting recommendations for each corporate event requiring a vote and all the client has to do is to accept the recommendation (or provide further guidance) and the shares

will be voted for them. At a stroke, this puts the beneficial owner of the shares in intellectual control of their assets while sparing them the need to get involved in the actual administration of voting practices. “When they log on to our system, they can see historic research reports written on the company. They can view their historic voting record with the company, together with their voting policies and they will have the issues that we have highlighted with regard to the particular company they are looking at,” he says. The voting advice that Manifest provides is triggered by aspects of the governance of the company that are of interest to the investor. This provides a

ISJ Investor Services JournalCorporate actions01 11 31 4112 22 32 4203 13 23 33 4304 24 34 4405 25 35 4516 26 36 4607 17 27 37 4708 28 38 4809 29 3910 30 4002 06 20 2118 1914 15

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One of the hottest voting topics at the moment is the issue of executive and board remuneration and bonuses, particularly in financial services

18-29 ISJ42.indd 18 19/08/2009 10:51

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professional financial investors to take responsibility,” Hewitt says.

Commenting on the “big picture” view of proxy voting, Hewitt says that one has to remember that voting, as an activity, is not something the investor gets paid to do. “There are aspects of fiduciary responsibility about exercising one’s voting rights, but it costs money and time to vote,” he points out. This means that some investors will only vote a certain proportion of their equities. Overseas equities in which they have a small holding, where their vote will get submerged in the general vote, often hold few attractions. However, demand for proxy voting services in general is growing hugely, he says. “Even before last year’s crash, the popularity of exercising shareholder rights was growing enormously. There has been a marked increase in socially responsible investment practices and fund managers generally will have a very keen sense of what their end clients expect them to do by way of voting,” he says. In fact the stream of investor queries in to fund managers via emails and suchlike makes it plain to managers that they need to be voting their shares where possible. Even fund managers running passive investment portfolios should feel the need to be active shareholders (as opposed to being “shareholder activists, ie someone who sets out to force through changes to company policy through voting pressure). On 3 August this year, the European Shareholder Rights Directive became law across the EU. This directive has had a particularly positive impact on corporate actions as far as beneficial owners are concerned. “Our take on the Directive is that it has been a very good thing. It has highlighted the need for minimum common standards around corporate events across Europe,” Hewitt says. One of the changes introduced has been the setting of a minimum of 21 days notice before the calling of a shareholder meeting, and the establishment of a record date, which is the date on which the shareholdings in the company are essentially established by the registrar for the issuer, and the voting rights pertaining to each shareholder. “The practice of share blocking, in particular was a concern for us,” says Hewitt. This is where beneficial owners had to have all their shares registered at a certain bank by a certain deadline before the meeting. Moreover there could not be

ISJ Investor Services JournalCorporate Actions01 11 31 4112 22 32 4203 13 23 33 4304 24 34 4405 25 35 4516 26 36 4607 17 27 37 4708 28 38 4809 29 3910 30 4002 06 20 2118 1914 15

FinancialEurope’s Premier Financial Data Management Conference

Information Management

9th – 11th November 2009 • The Guoman Tower, London

40+speakersfrom leading

fi rms

Europe’s Longest Running Reference Data Conference: Build Value, Compliance and ROI across Your OperationsVisit www.fi ma-europe.com For Details!

Roundtable discussionsthroughout the conference

More interactivity

Focus on ROI and Cost

The FIMA Advisory Board

20+ NEW SPEAKERS INCLUDING:

NEW FEATURES...

Michael McMorrow, EnterpriseData Warehouse Designer, AIB

Arnt-Erik Hansen, Executive Director,Head of Group Partner Data, UBS

Richard Snookes, Director, Global ReferenceData Operations, BARCLAYS CAPITAL

Julia Mariasova, VP StrategicDevelopment, CREDIT SUISSE

Loretta Etheridge, Global Head of DataOperations, HSBC

Balakrishnan Nayar, VP FinanceArchitecture – Standards, CITI

Antonio Henriques, Head of Brokerage,Securitization & Contents Area,MILLENNIUM BCP

Alberto Ricciotti, Head of Group Pricing,Capital Allocation, Planning, Finance &Administration, UNICREDIT

Tom Dalgleish, VP Investment Banking,Enterprise Reference Data, JP MORGAN

Organised By:

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FOCUS DAY: 9th November 2009

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5313 Advert 210x276mm.indd 1 14/8/09 16:59:35

any sale or dealing in those shares until a set number of days after the meeting if the shareholder chooses to register their shares to vote. As Hewitt points out, fund managers hate this since it leaves them powerless to act if a company in which they have a stake crashes during that blocked period. As a consequence, they will quite often opt not to vote if there is a share blocking mechanism in place. Many global custodian banks and infrastructure providers like Euroclear and Clearstream have been working on beefing up their corporate action/corporate event services and some have been lending their weight to cross-border initiatives to harmonise practices around corporate events. Denis Peters, Communications Director at Euroclear, for example, says that Euroclear has been doing a good deal

of work to harmonise corporate action rules and procedures across markets. “In the three Euronext markets, Belgium, France and the Netherlands, where we recently launched a single platform, we have delivered Europe’s frist group of markets working with harmonised market rules and practices,” says Peters. Euroclear identified more than 250 different market practices across its five markets and has worked with market participants, step by step, to harmonise each of these disparate practices. One example Peters gives is the record date. In the French market, for example, there was no such concept, so Euroclear worked with the French market and authorities to introduce a record date to French securities to determine when, for example, a security is traded and settled ex-dividend. This is now a common measure across the seven Euroclear group markets. Another initiative that is still patchy, in

Peters’ words involves the identification of a security’s ultimate beneficial owner. “In the Netherlands, there will be new legislation expected in early 2010 which will make it mandatory for end investors to disclose their identity to issuers. Once this happens, investors can communicate directly with issuers when it comes to voting and they will then be in a position to get voting and other relevant information directly from the issuer,” says Peters. At present, it is possible for an objecting beneficial owner to be totally anonymous to the issuer in some markets, such as in the UK and the US. Another issue where there is as yet little harmonisation is tax collection practices. There is no equivalent, for example, of the UK’s stamp duty in other markets. “There are clearly improvements to be made with issuers communicating corporate action event information to beneficial owners and intermediaries. SWIFT plays a key role as the gateway for most ISO standards and messages, particularly within the interbank community. However, Euroclear has become one of the first entities other than SWIFT to receive approval for a new set of ISO 20022 messages to be used between issuer-appointed agents and central securities depositories when communicating both corporate action information and instructions between them,” he says. In 2010, Euroclear intends to launch a single platform for custody across five of its seven EU markets, and the international CSD, Euroclear Bank, which will process all domestic and cross-border custody and corporate events for securities held by those entities. Sweden and Finland will come onto the platform in 2012. “This will comprise corporate actions covering more than 60% of the blue-chip equities in Europe and more than 50% of domestic fixed-income securities in Europe,” Peters says. Laura Pollard, Executive Vice President at Fidelity ActionsXchange says that the riskiest and most complex corporate event tasks for any custody service are those involving any voluntary or elective corporate actions. “A miscalculation of the due dates, time frames or payout options can cost the client firm millions here,” she says. Fidelity ActionsXchange looks to combine its analytical expertise, data validation capabilities and technology to provide comprehensive, timely and accurate information, along with tools

“Investors are taking an interest in the internal controls within a company”

Paul Hewitt,Manifest

18-29 ISJ42.indd 20 20/08/2009 10:01

FinancialEurope’s Premier Financial Data Management Conference

Information Management

9th – 11th November 2009 • The Guoman Tower, London

40+speakersfrom leading

fi rms

Europe’s Longest Running Reference Data Conference: Build Value, Compliance and ROI across Your OperationsVisit www.fi ma-europe.com For Details!

Roundtable discussionsthroughout the conference

More interactivity

Focus on ROI and Cost

The FIMA Advisory Board

20+ NEW SPEAKERS INCLUDING:

NEW FEATURES...

Michael McMorrow, EnterpriseData Warehouse Designer, AIB

Arnt-Erik Hansen, Executive Director,Head of Group Partner Data, UBS

Richard Snookes, Director, Global ReferenceData Operations, BARCLAYS CAPITAL

Julia Mariasova, VP StrategicDevelopment, CREDIT SUISSE

Loretta Etheridge, Global Head of DataOperations, HSBC

Balakrishnan Nayar, VP FinanceArchitecture – Standards, CITI

Antonio Henriques, Head of Brokerage,Securitization & Contents Area,MILLENNIUM BCP

Alberto Ricciotti, Head of Group Pricing,Capital Allocation, Planning, Finance &Administration, UNICREDIT

Tom Dalgleish, VP Investment Banking,Enterprise Reference Data, JP MORGAN

Organised By:

Contact Us

Don’t miss theFIMA focus day on:

How To Enhance And Measure Data Quality In

A Cost Controlled Environment

FOCUS DAY: 9th November 2009

CONFIRMED SPONSORS AND EXHIBITORS SO FAR INCLUDE:

+44 (0)20 7368 9465

fi ma@wbr.co.uk

www.fi ma-europe.com

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5313 Advert 210x276mm.indd 1 14/8/09 16:59:3518-29 ISJ42.indd 21 20/08/2009 10:01

22

Corporate Actions ISJ | Investor Services Journal

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ISJ Investor Services Journal

Why is vote confirmation important?

Elizabeth Maiellano, Senior Director, Institutional Product and Strategy at Broadridge Financial Solutions

Those outside the world of corporate governance may ask why vote confirmation is important, while those involved would instead ask why it must be so problematic. The term “vote confirmation” seems to define itself: a vote instruction is attested to by the receiver. However, in the world of proxy, the act of authorising someone to vote on matters of corporate governance on behalf of someone else can be complex and fragmented, making confirmation of that action even more difficult. Defining vote entitlement is the first step in the proxy voting process. An investor’s entitlement to vote at a shareholder meeting is dependent on the class of shares held, a determination based on the records of the company shareholder register or custodial records. Markets may establish a

record date, or entitlement could be determined based on the shareholder’s position as of the meeting date. Voting entitlement calculations are made based on settled shares held in an account that are not pledged, on loan or otherwise hypothecated. Institutional investors continue to have a growing concern: are all of their eligible shares, or those shares earmarked for voting, and the associated vote instructions actually represented at shareholder meetings? In 2004, The Myner’s Report outlined a comprehensive action program to remove obstacles to casting votes by institutional investors at UK company meetings. One step included urging institutional investors to annually review a sampling of shareholder meetings in order to provide a level of

confidence in the process. However, the time has come for the industry to deliver on vote confirmation, rather than relying on individual record keeping and reporting. It is a matter of confidence and integrity. The obstacle to implementing vote confirmation is the active involvement of every organisation involved in the process. Today, Broadridge Financial Solutions, Inc. is able to confirm voting in the US where it acts as tabulator. In 2007, Broadridge implemented a vote confirmation process through its ProxyEdge® system for those US corporate issuers for which it provides direct tabulation services. Users of the platform are able to receive confirmation that their vote instructions were recorded at these shareholder meetings. In this case, transparency is possible

because the entity that has the information provides it directly to the voting party. In most markets, Broadridge and other proxy processors are dependent on the various entities in the chain to provide their processing status of the instruction. Broadridge recognises that all parties in the industry must be involved in the confirmation process in order for it to be effective. Partnering with Yale’s Millstein Center, Broadridge will co-host an industry conference to examine ways to achieve complete vote confirmation. Today, commitment to the process varies. There are obstacles to overcome: cost, transparency of data, and automation. Issuers, investors, custodians and intermediaries must work together to ensure that vote confirmation is the accepted standard. n

to help automate manually intensive processes. Proxy voting has been the subject of much increased scrutiny recently, she says. “Both investors and regulatory bodies are pushing for greater transparency into investment strategies, corporate actions and related corporate announcements. “Investors want insight into the entire voting lifecycle and value highly transparent processes that can track, control and account for election decisions across all stages,” she adds.ActionsXchange provides proxy meeting notices and supporting regulatory filings as part of its offering and Pollard says that it is currently exploring technology to support a more robust and compliant downstream event management lifecycle. There is no doubt that for investors trading across multiple borders, the different regulatory, legal and data rules that apply from market to market really do add an additional layer of complexity to

already complicated information. “Because of this, firms are increasingly turning to providers with the market expertise to act as partners in managing risk who can provide guidance and support to transform their data into actionable intelligence,” she says. Payment too, is not without its complexity. “Payment of dividends in the currency of choice is highly dependent on the timing of the dividend, actual terms of the declaration and current FX rates. It is an area where data validation and careful analyst review is paramount. “We consistently work closely with our clients to understand their evolving needs. As such, currency options are something we have identified as being a top priority and will be included in our upcoming release,” Pollard concludes. Fidelity ActionsXchange provides flexible, technology-driven global event management solutions for many of the world’s financial industry leaders. n

“Both investors and regulatory

bodies are pushing for greater

transparency into investment

strategies”

Laura Pollard,Fidelity

ActionsXchange

18-29 ISJ42.indd 22 20/08/2009 10:01

ISJ Investor Services Journal Sibos

Clear2Pay is an innovative financial technology company focused on delivering globally applicable solutions for secure, timely electronic payments. Headquartered in Belgium, the company facilitates banks and financial organisations in their provision of payments services. Clear2Pay’s technology helps to reduce transactions processing costs, and to deliver new, compelling payment services in a competitive way.

The Open Payment Framework is built entirely on a Service Oriented Architecture (SOA) delivering common, reusable services consisting of a comprehensive data model, choreographed payment business processes and configurable services including parsing, validation, cost based routing, warehousing security, auditing and many more. From this core framework, Clear2Pay has created pre-defined solutions including the Bank Payment Hub, Imaged Check Processing, SEPA, International Payments, EBPP, Remittance and eBanking. In addition Clear2Pay offers a wide range of card related payments products and testing tools. At Sibos 2009 Clear2Pay will also demonstrate its set of payment solutions for the Chinese market and the new ‘SEPA in a box’ solution for fast track compliance, as well as the newly launched iPhone mobile banking solution. Clients include global and major regional financial institutions such as ING, Banco Santander, Crédit Agricole, Nordea, Abbey National, Bank of East Asia, Shenzhen Ping An Bank, United Arab Bank, ANZ and Commonwealth Bank. Clear2Pay operates out of 13 offices and currently employs over 450 staff.

Contact detail: www.clear2pay.com – booth 1-D18

Clear2Pay NV SA Schaliënhoevedreef 20A 2800 Mechelen Belgium T: +32 15 79 52 00 Mark Hartley, VP Strategy and Business Development/CMOE: mark.hartley@clear2pay.com

Building on over 23 years of successful presence in capital markets with over 160 clients and 32,000 users worldwide, Murex has developed an unmatched competence in the design and implementation of cross-asset trading, risk management and processing solutions for the world’s top buy- and sell-side financial institutions, corporations and utilities. MXpress™, the latest Murex implementation

methodology, leverages the wealth of business content accumulated through a combination of pre-packaging of best practices and client-tailored approach enabling an accelerated process of delivery. A team of over 1150 specialists, located in Asia, Europe and America are dedicated to providing clients with the best support in the industry. Key Services: Featuring unrivalled product coverage and leading functionality in each asset class (interest rates, foreign exchange, equity, credit, securities and commodity instruments), the platform delivers superior power and flexibility, from high volume trading to exotic product structuring. MX Risk Manager provides cutting edge tools for the management and control of credit risk, market risk & liquidity risk and MX Collateral Manager enables enterprise-wide collateral management and margin trading – both solutions are available as stand-alone offerings. Any industry process can be implemented and extended as needed through addition of external tasks or by integration into enterprise-level workflows. Highly customisable, our fully fledged workflows are available pre-packaged or tailor-made in order to fulfil your business requirements. Pre-and post-trade compliance are provided on a wide variety of rule types. The solution introduces a benchmark in scalability through its innovative multi-business, multi-entity architecture.Key Locations:Regional Offices: Paris, France (Headquarters) – Singapore, Singapore – New York, United States of AmericaOther Offices: Beijing (China) - Beirut (Lebanon) – Dublin (Ireland) – London (United Kingdom) – Luxembourg (Luxembourg) – Sydney (Australia) Key Contacts (incl. telephone numbers and email) Paris, France (Headquarters) – Telephone: +33 1 44 05 32 00 – email: sibos@murex.com; Singapore, Singapore – Telephone: +65 621 602 88 – email: sibos@murex.comNew York, United States of America – Telephone: +1 212 381 4300 – email: sibos@murex.com

With an extensive network that spans over 70 countries, well-positioned in the emerging trade and investment corridors across Asia, Africa and the Middle East, Standard Chartered’s Wholesale Banking business combines global capabilities with local expertise to develop innovative products and services to meet the diverse needs of our corporate and institutional clients in some of the world’s most dynamic markets.

Building on a rich banking heritage, Standard Chartered is noted for a client-focused approach to business, unmatched on-the-ground expertise and a solid track record of innovative, award-winning financial services solutions, reflecting our continued commitment to power our clients’ ambitions.

As one of Asia’s leading custodians, Standard Chartered serves global, regional and 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.

C: Giles Elliott, Global Head, Securities ServicesP: +65 6517 0134E: Giles.Elliott@sc.comW: www.standardchartered.com

eSecLending is a leading full-service securities lending agent. Its program has been adopted by some of the world’s largest and most sophisticated

institutional investors including pension funds, mutual funds, investment managers and insurance companies. eSecLending has introduced investment management practices to the securities lending industry, offering beneficial owners an alternative to the custodial lending model. Their philosophy is focused on providing clients with comprehensive risk management, high touch client service, program customization and optimal returns. These themes are executed through their approach, which is to begin each lending program with a competitive blind auction to determine the optimal route to market whether it is via exclusives or discretionary lending. Having built their business to incorporate investment practices such as the use of specialists, multiple-managers, unbundling, price transparency, and competition, their approach ensures best execution and also provides clients with greater control over their programs, allowing them to more effectively monitor and mitigate risks and counterparty relationships.Key Locations:Boston175 Federal Street, 11th Floor, Boston, MA 02110, United States of America+1 617 204 4500London10 King William Street, 1st Floor, London, EC4N 7TW United Kingdom+44 (0) 20 7469 6000Sydney60 Castlereagh Street, 17th Floor, Sydney, NSW 2000, Australia+61 (0) 2 9220 3610Key Contacts:Christopher Jaynes, Co-Chief Executive Officer, cjaynes@eseclending.com+1 617 204 4500Karen O’Connor, Co-Chief Executive Officer, koconnor@eseclending.com+1 617 204 4500

www.eseclending.com

18-29 ISJ42.indd 23 20/08/2009 10:01

24

continues to play the role of the world’s reserve currency,” he says. Discussions are taking place about whether Asian countries would like to move away from the US dollar towards an alternative reserve currency based on some kind of a basket of currencies, but these ideas are still in their infancy. So currency harmonisation and openness remains a stumbling block. “Today, Hong Kong has some freedom to trade the Renminbi, which has been allowed to appreciate gradually against the dollar. There is a clear awareness on the part of the Chinese government that people who trade with China need to be able to pay in an efficient way and if you can get access to the Renminbi for trade, then you have begun to establish the infrastructure that can show how things can move forward quite rapidly in the region,” he says. However, Jonathan Butterfield, executive vice-president, marketing, for CLS Bank International, cautions that any pan-Asian settlement system is hugely ambitious and it is by no means clear that everyone in the region wants one. Many local CSDs for example, he points out, would lose lucrative, high margin revenues around the edges of their operation to such a system. “The most obvious place to start is the bond market, but even there, a linking system, which isn’t a grandiose scheme to “boil the ocean”, would be much more sensible than an all singing, all dancing, all-Asia owned independent entity,” he says. Butterfield warns that what really matters to investors is pricing and liquidity so that they can trade in and out. If settlement were so expensive that it knocks a few basis points off a trade, then that will be a big issue for investors. But for the most part settlement and clearing costs will be a fractional part of any deal. “You have to remember that while a pan-Asian bond market looks the obvious place to start, many Asian bonds are still denominated in distant currencies and the dollar still dominates. This annoys people in Asia since New York is asleep in the middle of the Asian trading day, but what do you get if you bring it all back to Asia? You probably fracture your dollar flows, since the bulk will still go through New York. I think the jury is still out on whether a pan-Asian settlement systems infrastructure is inevitable,” he says. n

around as to where to locate the proposed pan-Asian ICSD, it rapidly becomes obvious that the Japanese expect it to be in Tokyo, the Chinese think it should be in Shanghai and so on, with every country arguing that it is the “natural” home for any pan-Asian infrastructure entity. However, Chan argues that one should not let the inevitable national politicking cloud the fact that there is a real desire across the region, both from investors and at national government levels to harmonise and standardise the bond and equity markets in the region – however Herculean that task might look at present. Philip Reichardt, director and head of Euroclear’s International Collaboration Department says that one of the major problems is that while some of the participating countries, such as Japan, have very mature, open structures, others are in various stages of opening up. “The clearest example is mainland China, where if foreign investors want to buy securities, they have to do it through a Qualified Financial Investment Intermediary in China. Plus, of course, the Chinese currency is still not a freely traded currency, though there are signs that it is opening up little by little,” he says. The drive for harmonisation and a pan Asian settlement system goes back to the 1997 crisis, which started with the Thai baht. Securities denominated in baht and held as collateral plunged in value and with a knock-on effect which propagated through the banks of the region. This led the drive for pan-Asian settlement, particularly as analysis of the 1997 crisis showed that one of the causes was undoubtedly the lack of an Asian bond market, Reichardt says. However, he points out that there is more than one group of countries discussing their own initiatives, so there is no one, single pan-Asian initiative dominating play right now. “Today a great deal of the capital raising by Asian companies ends up with international bonds denominated in US dollars. Because there is no one standard dominant currency in Asia, the pivot currency always ends up being the US dollar, which

Settlement ISJ | Investor Services Journal

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ISJ Investor Services Journal

Custody services with a broader horizonAre you looking for a single point of entry to the Nordic and Baltic region? Or do you have your eyes set on a specifi c local market? Nordea is the leading Nordic custodian and the onlytruly Nordic player with well-established banks in Finland, Denmark, Sweden and Norway as well as a strong presence in the Baltic countries. A dedicated relationship manager supported by a specialist team will always be able to offer you a winning combination of regional competence and local insight. Our size, experience and connections with key players make us a sustainable provider in the evolving Nordic and Baltic securities markets.

To capitalise on our expertise, please contact

Ms. Anne-Lise Kristiansen, tel +47 2248 6238, email: anne-lise.kristiansen@nordea.com, Ms. Nina Groth, tel +45 3333 6124, email: nina.groth@nordea.com or Mr. Teemu Pihlatie, tel +358 9 165 51008, email: teemu.pihlatie@nordea.com.

Making it possiblenordea.com

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32551_Custody_203x267.indd 1 21.4.2009 12:27:47

The quest for pan-Asian settlement

For some time now Asian governments have realised that the fragmented state of the Asian bond market and equity market settlement infrastructure is putting the region at a serious global disadvantage. Many initiatives are under way, including the Asian Bond Markets Initiative (ABMI). However, despite political and market willingness, building a trans-border settlement infrastructure that unites independent markets in various stages of development is a mammoth task. The ABMI was the prime focus of the Asian Bond Clearing and Settlement Conference on 23 June this year, held under the auspices of the Hong Kong Monetary Authority. The initiative itself was launched two years ago by the finance ministers of the ASEAN + 3 group of countries (South East Asia plus China, Japan and Korea). Its aim was to develop efficient and liquid bond markets in the region, and to foster a high degree of financial independence in Asia. The project was given to a Group of Experts (GoE) in December 2007, who were asked to come up with proposals. As Alton Chan, Executive Director of Relationship Management, Asia/Pacific at Clearstream explains, the Group of Experts is now set to present two alternatives to the ASEAN + 3 finance ministers in January 2010. “The two options on the table are the creation of an Asian International Central Securities Depository (ICSD) or a CSD link up that would embrace a number of existing country specific CSDs, much along the lines of the European model, and would be a kind of virtual integration of existing CSDs in the region,” he says. These are two radically different options - creating a new ICSD would cost hundreds of millions of dollars and the cost will take some visionary thinking to justify in the early years. There are also huge challenges, Chan says, with forging links between national CSDs. “Every country in the region at present has a fully functioning CSD, but it is relatively new in most of them and is considered a national asset. So merging it with other nations’ CSDs is a real political challenge,” he says. In a similar vein, as soon as talk gets

Market enthusiasm doesn’t diminish the post-trade task in the bond and equity markets.

18-29 ISJ42.indd 24 19/08/2009 10:47

Custody services with a broader horizonAre you looking for a single point of entry to the Nordic and Baltic region? Or do you have your eyes set on a specifi c local market? Nordea is the leading Nordic custodian and the onlytruly Nordic player with well-established banks in Finland, Denmark, Sweden and Norway as well as a strong presence in the Baltic countries. A dedicated relationship manager supported by a specialist team will always be able to offer you a winning combination of regional competence and local insight. Our size, experience and connections with key players make us a sustainable provider in the evolving Nordic and Baltic securities markets.

To capitalise on our expertise, please contact

Ms. Anne-Lise Kristiansen, tel +47 2248 6238, email: anne-lise.kristiansen@nordea.com, Ms. Nina Groth, tel +45 3333 6124, email: nina.groth@nordea.com or Mr. Teemu Pihlatie, tel +358 9 165 51008, email: teemu.pihlatie@nordea.com.

Making it possiblenordea.com

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32551_Custody_203x267.indd 1 21.4.2009 12:27:47

18-29 ISJ42.indd 25 20/08/2009 10:01

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ISJ Investor Services Journal

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The leading provider of Custody and Clearing Services in Norway

DnB NOR proactive, adding value, delivering quality

Offering: Commitment, Knowledge, Experience and Excellent ServiceFor further information please contact:

Head of Securities Services - Jan B. Penne: jan.penne@dnbnor.no

Global Relations and Support - Bente Hoem: bente.hoem@dnbnor.no

e-mail: custody@dnbnor.no • www.dnbnor.no/custody

38032_DnBNOR_nordicpartner_tgs.indd 1 26-09-08 14:55:18

Tough nut to crackInternationally, assets in custody exceed USD65 trillion, with USD23 trillion of this belonging to the world’s biggest global custody player, BNY Mellon Asset Servicing. It is a big market, and in Spain, one that is dominated by four main fi rms: BNP Paribas, Citibank, and two major Spanish banks, Banco Santander and BBVA. However, the Spanish custody market itself is one very closely protected by stringent legislation - particularly when it comes to the entry of a foreign custodian. For example, only commercial and savings banks, stockbroker entities and credit co-operatives can act as custodian entities in Spain. What is more, their corporate domicile and central administration must always be local, and prior authorisation from the Spanish Securities Regulator, the omisión Nacional del Mercado de Valores (CNMV), is required. Marta de Alba, Executive Director Securities Services from BBVA, Spain believes that the tightly controlled market is what makes Spain distinctive. “Whilst it has probably acted as a barrier to the development of business in the years of growth, we now see it as an advantage in the face of the current crisis,” he says. A senior member of Banco Santander’s Securities and Listed Derivatives Services team explained that “Spanish legislation covering the equities world is complex and makes the custody and settlement process something for experts only. Not knowing the market and its peculiarities can prove costly and many a client has had their fi ngers burnt. However, the Spanish market has been probably the most attractive market in Europe over the past 10 years due to the high returns offered by the companies included in the IBEX-35 index and this has made the “risk” of trading in Spain worth while for all. The most notorious aspect of the custody and settlement process and legislation is the technical references (or RR’s as they are commonly know) as well as the need for the registration of securities as part of the settlement process. These are the two key points that make the Spanish market different from most other European venues as well as the

main source of trouble for non-resident investors. However, this has also become an opportunity for domestic players to enhance their service and product offering to non-resident investors to facilitate operating in the Spanish market and allowing domestic players to take part of the pre-settlement functions out of the non-resident client’s fl ow and into our

own back-offi ce fl ows and procedures. This has greatly helped our clients to reduce headcount and risk exposure and has allowed us to add signifi cant value to our clients and expand our product offering reaching beyond run of the mill custody and settlement services”.The Spanish fund market itself is characterised by extreme fragmentation. With more than 6,000 investment funds and SICAVs (open-ended collective investment schemes), it represents 10% of

worldwide investment funds by number, but only 2% of Assets Under Management (AUM). The balance sheets of most of the Spanish asset managers are very weak, with one in four currently in severe defi cit. José María Alonso-Gamo, managing director of RBC Dexia, Spain, suggests that a restructuring of the industry is a must. “Asset managers with less than �500 million in AUM may need to explore mergers to survive,” he explains. “Due to the increase in costs and income reductions, mergers between funds and asset managers are how we foresee the industry in the short term.” And this industry has no plans to open up to more foreign custodians any time soon. Alvaro Camunas, Head of BNP Paribas Securities Services in Spain, commented that “during the last twelve months, the local regulators have been strengthening their requirements, and we feel that the current domestic environment is now even less accessible to foreign service providers, in particular, areas of the Depositary Bank and Fund Administration services”. When mentioning the recent strengthening of local regulatory requirements, Mr Camunas is specifi cally referring to those published in 2008 and 2009 by the CNMV. Examples of these circulars which impact the depository entities acting as custodians of Spanish funds include C 3/2008 on the accounting rules of funds, C 4 /2008 on the public information to be prepared by funds, and C 3/2009 on the reports to be provided by Depository Bank entities. Mr Camunas goes on to explain: “We believe that this legal framework reinforces local regulatory requirements making the access to foreign custodians more diffi cult than ever. The fact that UCITS IV does not contemplate the European passport for depository entities is, of course, a further drawback for these entities.” In regards to the confi dence Spanish investors have on funds, Mr Camunas believes that the latest fi nancial events have reinforced their already conservative profi le. “This, linked with the slow recovery of the main fi nancial indexes and the reinforcement of regulatory requirements,

“Asset managers with less than EUR500 million may need to explore mergers to survive”

Jose Maria Alonso-Gamo, RBC Dexia

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does create a very challenging environment for all the domestic fund industry,” he says. However, this is not all bad news. “We believe this presents a good opportunity to reinforce the level of professionalism in the market, as only the custodians showing the adequate level of recourses, expertise and commitment will be able to subsist.” The Spanish market itself has also undergone signifi cant change over the last twelve months. For example, many asset managers owned by banks have now been vertically integrated, making them accountable for not only the asset management, but the associated administration, risk control and compliance issues. According to Mr Alonso-Gamo, this process was “possible with buoyant markets, when analytical accountancy was not a priority”. He added: “Since the last quarter of 2008 the main aims are no longer growth at any cost, but a more logical focus on company profi t and loss. The market trends change so rapidly, meaning that new regulatory rules have to be implemented at short notice, and as a result, the P&L has turned red.” For custodians specifi cally, change has occurred in the asset mix of client funds. “Last year, we saw a signifi cant shift from

equities to fi xed income assets,” explains Mr Camunas. For RBC Dexia, Mr Alonso-Gamo describes a different experience. “The rising stars within the underlying assets of local investment funds are public debt and bank deposits. On the other side, fund managers are still very reluctant to trade in high yield fi xed income, equities, collateralised debt obligations and other structured vehicles. Volumes traded on the stock exchange are still at relatively low levels, even though some innovative products such as exchange-traded funds and reverse exchange-traded funds are gaining market share.” So how do these changes impact the custodian? “Most of these assets, mainly public debt and bank deposits, are less profi table for custodian banks,” Mr Alonso-Gamo states. “The fees charged for custody of public debt are not signifi cant, and interest rates worldwide are at their lowest level, so margins are being squeezed.” For BNP Paribas, Mr Camunas mentioned the impact that the redemptions carried-out on both traditional funds and, more signifi cantly, on alternative funds. “This has had, of course, a relevant operational and

organisational impact on our teams, as well as tightening our margins.” Another change of note is the surging of interest in the process of outsourcing. “This is driven by three key points,” explains de Alba. “Firstly, it is due the increasing complexity of the assets held in clients’ portfolios, making them more diffi cult to administrate and settle. Secondly, communication has vastly improved at a global level, and fi nally, due to the necessary reductions and concentration of efforts in core business areas, outsourcing is now more pertinent.” Mr Camunas believes this incremental increase in outsourcing presents room for potential. “Entities that were not even considering outsourcing some of their non-core activities some months ago are now knocking on our door to ask what solutions we could provide. This includes depository, private and retail banking back-offi ce services, and is probably the area of fastest growth in our business currently.” The close scrutiny of the CNMV and the typically conservative nature of Spanish investors, plans to open up to more foreign custodians are not set to materialise any time soon. n

ISJ Investor Services Journal Custody

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28

On the spot: Investor Services, Asia

With the increasing complexity of Asian jurisdictions, instrument types, fund structures and investment opportunities, valuation has become a key issue. Arguably, asset managers have less information on underlying investment risks when greater access to data supporting their strategies, asset allocation and instrument coverage is required, especially as Asian regulators tighten rules around emerging markets and structured products. As market sophistication has increased, it has been possible to obtain prices only from the selling broker, which leads to inherent counterparty risks affecting the valuation of the entire fund/unit price. The falling market makes us question

valuation processes. Does lack of liquidity affect market price validity? How do you price new and sophisticated instruments - can your TPA handle them? Instrument price data is received from the broker by the portfolio manager through order execution processes, onto the TPA/custody operations, then posted into accounting and valuation systems. With a traditional investment management system this would be handled by a series of disparate systems, linked together with middleware or other form of interfacing. Each system would have its own database. Pricing validation control is thus limited as the data enters the unit pricing system, which impacts investors’ results. Valuations, cash and holdings

How do changing markets affect the valuation challenge? Response by Nick Quin, director sales and marketing, Asia, SimCorp Asia Pty. Ltd information are then fed back into risk

and performance systems separately with data replication across multiple systems, leading to data disparity and more reconciliation and auditing costs. Asian regions require sophisticated investor and regulatory reporting aggregated regionally then broken down by country and individual tax requirements. This requires transparency and timely access to consistent information during valuation - only be achieved through a seamless processing system based on a single core database. Information is entered once and is accessible enterprise-wide, providing transparency and immediate accessibility. The fund manager has a reliable view across assets classes, portfolios and holdings across the region. n

What does Asia want next? Re-sponse by

Francis Braekvelt, head of planning and development, Asia Pa-cific, at BNY Mellon

Looking to Asia ISJ | Investor Services Journal

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ISJ Investor Services Journal

24

From where I sit, the future for Asia appears brighter than for any other region around the world. The lessons learned from the 1997 Asian financial crisis – the need for stronger regulation of the financial sector as well as improved governance through increased transparency and accountability – cushioned our region from some of the killer punches that hit home elsewhere. However, we have not been untouched.

The global credit meltdown will result in the tightening of financial regulations. Investors are also being forced back to basics, rediscovering the fundamental risk-reward theorem and adopting new approaches to assessing and mitigating counterparty, market and business risk. Transformational changes like these create opportunities and challenges alike for market participants and service providers. The recent market disruptions have brought home to many institutions that they are perhaps not as well equipped to handle post-trade processing and related activities in-house as they might have thought. Factor in the cost of upgrading and maintaining in-house solutions, and we expect to see more firms partnering with providers like ourselves to take advantage of sophisticated valuation and monitoring solutions we offer to enhance transparency and mitigate operational risk. Many institutions are also placing considerable attention on data management as a central component

of their risk management strategy – a relatively new development for Asia. For many, a data-centric model is being explored that centralises all their securities, accounting, analytic and performance data in an effort to not only provide greater transparency within their portfolios, but to meet the anticipated regulatory oversight. We have seen a clear flight to strength trend sweep across Asia as they look for trusted partners and apply stringent due diligence processes to counterparty and service provider selection. In response, service providers will have to introduce customised, automated and innovative solutions focusing on data management and transfer protocols, and other value added services. With renewed investor realism and given the vibrant markets, emerging sectors (such as pensions) and increasingly sophisticated and affluent investors in Asia, we are optimistic about the region’s future opportunities and its role as a growth engine. n

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18-29 ISJ42.indd 29 20/08/2009 10:01

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Custody ISJ Investor Services Journal

The custody interview: SEBISJ asks Ulf Norén (pictured below), global head of sub-custody client relations, SEB, Custody Services, Merchant Banking, about expanding a custody business and today’s market challenges. 1. How do you approach and overcome issues in managing the geographical diversity across all your markets? SEB’s regional model saw the light of day in 1999 when Denmark, Finland and Norway was opened up as greenfielding projects. The first obstacle to deal with is the realisation that also neighbouring countries are very different and the further away from home turf you get, the more diversity issues you are bound to encounter. You need to organise in a way where objectives of consistency, same ‘touch and feel’ and overall corporate and client objectives are set first but without ignoring cultural differences, language differences, the historical reasons for given market structures, interacting with local major players, habits, level of authority respect, politics, side plays, influencing and lobbying etc. This need to be constantly managed as differences will not go away but can be used to the organisations advantage. In the sub-custody business, a number of house rules have helped us in achieving objectives:- Direct reporting to the global head of custody- equal representation in management groups - Centralisation where it makes sense (Product management, Global Relations, Finance) but NEVER on local operations level - harmonise fee structure, IT environment, reporting, high level product offering and documentation framework. With that in place, much is done. However, things will remain different and some markets can not be highly harmonised in a foreseeable future, f ex Ukraine. Finally, no matter how well you become in running a regional model, you must be outstanding in each and every market you provide services in.

2. How do you go about infiltrating foreign markets: is it through organic

or acquisitive growth? How do you select local partners? It is of great importance to obtain intelligence and go for a detailed market analysis. Here one must think thoroughly to define where you would like to start and what the medium term objectives are. The approach is different depending on the level of maturity, how crowded the market is and its complexity. Basically, you have four options: 1) Grow organically2) Grow by way of acquisition3) Enter into a joint venture 4) Keep out SEB’s main strategy is to follow the bank - only when we have a SEB banking operations structure in place are we in total control of the custody set up and delivery. That means that alternative 1, 2 and 4 are available to us and only in very special circumstances would we explore the joint venture alternative as they are hard to manage and most are deemed to an unsuccessful ending - we know of a very limited few that has had any strong success. Our Nordic custody set up was a fully organic growth starting in 1999 and now

10 years later has lead us to a market leading position. The three Baltic banks where a combination of acquisition and organic growth where a very strong position was in place in Lithuania while Estonia and Latvia was weaker from a market share standpoint. Assimilating business into the regional model has lead to organic growth and we are now the leader in this region, having also helped us to offer a seven-market geographical and trading environmental region for offering. Germany was in place with substantial banking operations through the acquisition of BfG Bank. The reason for the addition of custody was to secure organisational and business model assimilation of the global custody business and to make substantial savings on our own German portfolio. The sub-custody part did therefore lead a fairly quiet life until we started to market it to Nordic/Baltic institutions and lately also to a wider array of international banks. We set up in Ukraine as we saw an opportunity to grab a position in one of the largest nations in Europe when we acquired Bank Agio, and this trip has been really interesting with boosting market shares in the most likely most difficult, unpredictable and complex custody market in Europe.

“Of the BRIC nations we are already in the ‘R’ but have no plans for B, I or C!”

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ISJ Investor Services Journal Custody

“We are starting to see a new realism among clients that you get what you pay for” The latest on our list is Russia where we started in August of last year. Russia is true greenfielding and only for sub-custody. It has been our most structured market set-up so far and also this is beginning to pay off. When markets are highly competitive or does not fit into strategic models you might decide to keep out. So far, this has been our strategy for UK, France and Poland. 3. How do you deal with all the regulatory requirements of the different countries? A key question, especially in the aftermath of what happened in 2008, coming on top of all the ongoing European initiatives. This is more than a handful for any organisation and I believe you find the answer in the first question. We have refined the regional/local model to an extent that we do not miss out on initiatives and can employ an SEB opinion on regulatory initiatives that reminds of each other even in cases where they are strictly local. This means that we have a number of cases where the wheel doesn’t need to be re-invented saving us a lot of time and resources. The issue we often face is the need for a large legal work force in markets where that resource is scarce. That must be bridged by external consulting and by putting parts of the legal and compliance burden onto the management of the local operation.

4. What has been the impact ofthe market conditions? What are your response mechanisms? It has of course had the immediate impact of asset values shrinking, activity level coming down somewhat due to some institutions ceasing (either to exist or to drop business lines), interest levels travelling close to 0% has a severe effect on revenues from interest net. In addition you see a sharp increase in due diligence/compliance activities,

regulatory mass invasion and a global need to shrink balance sheet. If that is not a gloomy picture, then I don’t know what is. It is important to realise that this business will remain, that SEB has absolute intentions to keep playing a significant role and that new business ideas will emerge from the changed European playfield. The most obvious response to reduce cost and increase safety has been to replace bi-lateral settlement regimes for on-exchange trading for CCP-clearing - EMCF +2 in Denmark, Finland and Sweden and Oslo Clearing + ? in Norway. The emergence of the numerous MTFs is a response to the MiFID directive but it is already changing the trading environment and the fragmentation of trading models must be managed - yet another a business opportunity.

5. In Sweden, Estonia, Latvia, Lithuania and Germany, SEB offers universal banking services, but SEB aims to be a universal bank also in Ukraine. Why Ukraine, and how are you going about this?

SEB acquired Bank Agio in 2004 and followed up by the 2007 acquisition of the Kharkov based bank, Factorial Bank. This gave SEB access to nearly all important regional and local centres of Ukraine. SEB is big and among the four leading Custodians in Ukraine but in terms of traditional banking activity we are really small. When entering 2009, SEB had 1329 employees in the country and a market share of 0.43% in lending and 0.41% in deposits. SEB provides service to approximately 15000 corporate clients and 85000 retail clients and runs about 100 branch offices in the country. Our operations in the Ukraine include Retail Banking, Corporate Banking, Custody and Life and Asset Management. The ambition is to provide banking services and financial solutions to corporate clients and to meet the increasing demands for broad and more sophisticated banking and savings products among private individuals. The extension of business in Ukraine is in line with SEB’s strategy to strengthen the footprint in Eastern Europe through organic growth an add on acquisitions. There is an ongoing consolidation of the banking industry in Ukraine and despite the very critical situation for the economy it will offer continued opportunity for further growth. SEB is the fourth largest custodian and this is a

market where we intend to win more. A lot more. 6. SEB has won many plaudits recently, including ‘best Nordic sub-custodian’ and ‘best custodian in Sweden’. How have you differentiated yourselves from your competitors? The first level of differentiation is in terms of coverage. After establishing a trustworthy Nordic solution, the three Baltic subsidiaries were integrated and after that expansion has happened in Germany, Ukraine and Russia. This means that SEB can provide a recognisable SEB quality in the core area of the seven Nordic/Baltic countries which no other competitor does on the ground. Furthermore, the very outspoken objective of delivering consistency, manifested on the agreement framework and by using one and the same system across the Nordics is a definite differentiator and will become more and more meaningful the closer we will come to true marginal pricing. SEB as sub-custodian do not mix interests but lobby very visibly running a client agenda. This has been much appreciated as it becomes clear that the agenda is not hidden. We are for real, are outspoken

and do not run much of a crap marketing agenda claiming that we ‘’are the only Nordic Custodian’’ as we are not. Our fans claim that we are the best one but we have no problems realising that we have one very strong competitor in the shape of Nordea. Both of us will continue to win business and the sharp competition will make this a better place to be a client.

7. Are you looking to move into any new sub- custody markets, for example the BRIC nations? Of the BRIC nations we are already in the ‘’R’’ but have no plans for B, I or C! Let’s see what more will be on the agenda. As of today - no immediate plans to be announced though. n

“We have refined the regional model to an extent that we do not miss out on initiatives”

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32

something that really got to them, they lost their liquidity and they had their concerns but that could have been out of lack of experience with that asset class and strategy,” he says. Asking the same question today, or in a month’s time, could yield an entirely different result, Enos suggests. In fact, particularly on an institutional level, there is no difference between what Asian investors are looking for compared with their counterparts in the rest of the world – “the things that underline their priorities right now are independence and transparency,” explains Akshaya Bhargava, Chief Executive of Butterfield Fulcrum. The Madoff scandal and the wider economic downturn over the last two years may have originated in the West, but their lessons are being applied in Asia too. “If you look at the ecosystem of a hedge fund, the administrator is the only source of independently reconciled data,” Bhargava explains. “So if a fund does not use third-party administration, I think it raises a lot of red flags.” In general, Asian investors have often been keener than those in the West to develop a personal relationship with their hedge fund manager and find out how the underlying business works. This may go some way to explain why so many in the Asian sphere were particularly unhappy at being gated. “The further east you go, the more emphasis there is on the face-to-face relationship,” explains David

Hedge Fund Services ISJ Investor Services Journal

Sowing seeds for hedge growth Vorsprung durch Liquidität

Limited sponsorship opportunities available, contact Jon.Hewson@2i.tv

German Securities Lending Summit

GSL Global SecuritiesLending|

Presented by“Lending for Liquidity”•Risk•Regulation•Reward

Villa Kennedy, Frankfurt am Main

Wednesday 28th October ‘09

gsl.tv/germany

Hear opinions on how

and when liquidity will

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Find out how recent events have shaped the German securities lending sector.

Free places available for beneficialownersandselected

industry practitioners, register at gsl.tv/germany

German summit magazine print ad - 30-7-09.indd 40 30/07/2009 17:36

Asia is home to more than half of the world’s population and a growing share of global GDP, with a vast range of languages and cultures. Additionally, its hedge fund market is relatively immature when compared to Europe and North America but this has not impacted on the services available to funds and in some ways has put it ahead of the game. According to figures from Chicago-based Hedge Fund Research, total capital invested the Asian hedge fund industry stood at USD65 billion at the end of Q1 2009 – far less than the USD100 billion invested during Q2 2009 in hedge funds globally, which now have capital totalling USD1.43 trillion. Does this relative immaturity in the market mean that Asian investors have a different attitude towards hedge funds than elsewhere? A survey of investors, consultants and funds by the Bank of New York Mellon and Casey Quirk labelled The Hedge Fund of Tomorrow: Building an Enduring Firm found that 43% of Asian investors would “never” re-invest with a manager that had gated them – compared to just 3% of North Americans and 0% of Europeans. Is this indicative of a wider trend? Not so, according to Gary Enos, Executive Vice President of State Street, who was “surprised” by the report. “I think in the Asia Pacific region, especially where it was a newer strategy to investors, getting gated obviously was

Morrissey, Head of Business Development and Client Services for EMEA at SEI’S Investment Manager Services division. “Asian investors are interested in getting to know their manager and creating a long-term relationship, perhaps more so than in Europe or North America.” Andrew Gordon, Head of Alternative Investment Services for Asia Pacific at the Bank of New York Mellon, cites the example of a manager who is about to use his organisation as an administrator and is “very, very focused on structuring the performance fees so that it aligns the interest as well as it can between the firm, the manager, the individuals within the firm and obviously the investors to make sure that everyone is pulling in the same direction for the benefit of all”. But in some ways Asia has been ahead of the rest of the world in terms of the use of third-party fund administrators, suggests Colin Lunn, Head of Business Development for Asia-Pacific, Fund Services, at HSBC Securities Services. “People don’t realise that Asia is effectively 100% outsourced. All managers use third-party fund administrators. It’s very rare you come across an Asian-based manager who self-administers. You don’t really have the same issues out here that you see in the West, I would argue.” This, Lunn explains, is because of the evolution of the market, which saw a small number of start-ups which outsourced in order to keep costs down. The fact that Asia has been

Craig McGlashan finds that the Asian hedge fund market is set on strong foundations, with a widening array of services for managers.

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30-39 ISJ42.indd 32 20/08/2009 13:57

Sowing seeds for hedge growth Vorsprung durch Liquidität

Limited sponsorship opportunities available, contact Jon.Hewson@2i.tv

German Securities Lending Summit

GSL Global SecuritiesLending|

Presented by“Lending for Liquidity”•Risk•Regulation•Reward

Villa Kennedy, Frankfurt am Main

Wednesday 28th October ‘09

gsl.tv/germany

Hear opinions on how

and when liquidity will

return to the market.

Find out how recent events have shaped the German securities lending sector.

Free places available for beneficialownersandselected

industry practitioners, register at gsl.tv/germany

German summit magazine print ad - 30-7-09.indd 40 30/07/2009 17:3630-39 ISJ42.indd 33 20/08/2009 13:57

34

with emerging markets are at the heart of the matter, according to Lunn. “You’re dealing with valuation, pricing, those sorts of challenges out here, perhaps more than you see in the US and Europe. Asia is not as developed in terms of data, particularly say in the credit fixed income space - getting market data for those types of instruments is quite difficult so valuations can be a bit of a challenge,” he says. “Obviously you’re also dealing with a multitude of different markets, different regulations with trading and settlements, different languages, a lot more than you get in the Western world.” These cultural differences have led to a number of specific funds being created to tailor to particular needs and Asia is no exception. Many funds in the Middle East – as well as a growing number in Europe and North America – are based on Sharia law, which sets out a number of provisions on what investments can be made by the fund. But the differences in how the funds operate do not impact greatly on service providers’ underlying model, according to Ross Ellis, Vice President of Marketing and Client Experience at SEI’s Investment Manager Services division (IMS). “Our workflow, data management and processes largely remain unchanged regardless of where we are working, the main differences are on the presentation level, the degree of transparency and analytics provided and how we interact with clients,” he explains. Additionally, market differences can affect how the funds themselves operate, aside from any particular wishes of the client. The dominant strategy in Asia is long/short and the securities services industry has typically been dominated by boutique administrators, Lunn adds, and there are “still a lot of boutique players” in the region, despite a number of mergers in the industry. But he adds: “The big players out here that focus on the hedge fund space are ourselves, Fortis, Citco – they are the dominant players.” If Asian investors broadly resemble those in Europe and North America and they have access to the same level of services, does this mean hedge funds themselves are generally similar globally? The Hedge Fund of Tomorrow report outlined four models that hedge funds may take in the future and, according to Gordon, most Asian funds fall under the Single-Strategy Boutique model, basically the “classic” hedge fund structure. Despite this being a “perfectly fine model” worldwide, Asia “in many ways illustrates

Hedge Fund Services ISJ Investor Services Journal

The ORIGINAL industry-wide conference sponsored by and developed by securities lending and borrowing professionals for securities lending and borrowing professionals.

Panel discussions with Lenders, Agents, Borrowers, Consultants, & Business Leaders include:•  Industry Leaders Panel•  Emerging Markets•  Central Counterparties for Sec. Lending•  Collateral Management Issues

Keynote Address: James G. Rickards, Senior Managing Director, Market Intelligence,  Omnis, Inc. The conference chair James Slater, Senior Vice President, Capital Markets, CIBC Mellon Trust Company, Toronto and the conference planning committee are developing a comprehensive and relevant business program that you won’t want to miss.

http://www.rmahq.org/RMA/SecuritiesLending

The Original Securities Lending ConferenceDon’t Miss It!!!!

Planning to Attend: For registration questions, contact RMA, Kim Gordon (215) 446-4021,  e-mail: kgordon@rmahq.org or visit our Web site at

outsourced “from day one” is the main reason that the region has not seen the number of fraud cases that have occurred in the West, he suggests.

This outsourcing means that Asian hedge funds do not have to worry about the relative immaturity of the industry impacting on the services available. “Good quality services are definitely available” in Asia, according to Gordon. He adds that fund managers operating in places as diverse as Tokyo and Sydney can expect services from Bank of New York Mellon that are “similar in pretty much every respect to that which we would deliver from either the US or from Europe, from London or from Dublin, to our clients there”. Enos agrees that the Asian hedge fund services industry is strong, citing a number of factors that have grown the standard of service and care “considerably” in the last few years. These are the decline in the market, which has opened up capacity for firms to “redeploy technology and strengthen staff on a local basis”, the buying up of smaller administration shops by institutions which “are able to bring stability and deployment of services off a global platform” and the fact that Asian assets were “roughly 5% of the marketplace even at its high point”. He adds: “I think those things lend themselves to being able to catch up in terms of services available to the Asia Pacific region.” But what difficulties do these firms face when servicing funds in Asia, compared with more established markets like Europe and North America? Asia’s size, diversity and the fact that investors are working

“People don’t realise that Asia is effectively 100% outsourced anyway. All managers use third-party administrators”

Colin Lunn, HSBC

some of the limitations”. Under this design, the risk of capacity constrain is high and funds of this type often have difficulties in developing and maintaining the organisational balance. Once again, the report found that issues beyond investment performance, such as business management, distribution and operations, featured highly on investors’ wish-lists. However, Gordon has seen a trend in Hong Kong towards the Multi-Capability Platform outlined in the report, which offers a common brand, distribution and business infrastructure support along with multiple investment capabilities. This has been brought on by factors such as principal retirements or fund withdrawals, he explains. “In effect there are a few people out there that are actively consolidating and they’re bringing back the infrastructure or in many ways the investment skills of those other funds into their own umbrella as it were and becoming much more like the multi-capability firm that we described,” he says. “You have an ability to share both some of the investment that’s needed to build the investment side, be it technology, access to the right quality of trading systems and information flows, as well as the other elements of business management operations and distribution as well. These can be shared among a broader group, so we are seeing some of that in Asia already.” At a closer level, perhaps the two most interesting countries in the region are China and India, both of which have seen their economies continue to grow despite the worldwide downturn. But despite their similarities – huge economies and large domestic demand for instance – they are “very different” from a hedge fund point of view, Bhargava explains. “I think that both represent opportunities but China is much less transparent from an investor standpoint. India is far more transparent and the financial, equity and bond markets are much better regulated. But if you talk particularly about hedge funds, my personal view is that both these markets are delivering strong returns on a long-only basis due to the high growth of these economies.” Bhargava “does not anticipate” the same level of hedge fund activity occurring in these countries that is seen in the West. However, Lunn believes that, despite hedge funds in China operating offshore, the industry will open up. “I don’t think we’re that far away from seeing a strong hedge

01 11 21 31 4112 32 4203 13 23 33 4304 14 4405 15 25 35 4516 26 36 4607 17 27 37 4708 18 28 38 4809 19 29 3910 20 30 4002 06 22 24 34

30-39 ISJ42.indd 34 20/08/2009 13:57

The ORIGINAL industry-wide conference sponsored by and developed by securities lending and borrowing professionals for securities lending and borrowing professionals.

Panel discussions with Lenders, Agents, Borrowers, Consultants, & Business Leaders include:•  Industry Leaders Panel•  Emerging Markets•  Central Counterparties for Sec. Lending•  Collateral Management Issues

Keynote Address: James G. Rickards, Senior Managing Director, Market Intelligence,  Omnis, Inc. The conference chair James Slater, Senior Vice President, Capital Markets, CIBC Mellon Trust Company, Toronto and the conference planning committee are developing a comprehensive and relevant business program that you won’t want to miss.

http://www.rmahq.org/RMA/SecuritiesLending

The Original Securities Lending ConferenceDon’t Miss It!!!!

Planning to Attend: For registration questions, contact RMA, Kim Gordon (215) 446-4021,  e-mail: kgordon@rmahq.org or visit our Web site at

30-39 ISJ42.indd 35 20/08/2009 13:57

36

Hedge Fund Services ISJ Investor Services Journal

Panel - fund administration in emerging markets

As fund industries in emerging markets in Asia and Latin America continue their growth, ISJ asks the experts about serving local and foreign clients.

Francis Braekvelt is head of planning and develop-ment, Asia Pacific, at BNY Mellon

T. Andrew Smith, Executive Vice President, Global Busi-ness Development Head at Butterfield Fulcrum

Stuart Feffer is co-CEO of LaCrosse Global Fund Services

1.Many Asian and Latin Ameri-can markets are developing bur-geoning fund industries. Has the number ‘local’ funds you administer increased over the last few years, and what is the percentage of local funds com-pared with the total amount of funds you work with (for example, from US and European fund clients) that are active in these markets?

BRAEKVELT: Fund penetration in Asia has traditionally been low compared to other regions but a catch up process appears to be well underway. This process, however, will be gradual and will vary between countries/ sectors and the volatility of fund flows more significant. Asset managers in Asia continue to adopt a combined onshore and offshore approach to benefit both from the domestic opportu-nities while also leveraging the passporting opportunities linked with offshore structures like the UCITS funds. With the beginnings of an

Nordic Custody ServicesAnnika Larsson - Head of Relationship Management & SalesTelephone: +46 8 7018141Mail: anni51@handelsbanken.se

Flexibility on a solid groundHandelsbanken Nordic Custody Services is locally present in all the Nordic markets, and offers a wide product spectra to a diverse client base. Handelsbanken is one bank throughout the region and we pride ourselves on being the most flexible provider of custody and clearing services in the region. We are also one of the highest rated private banks in Europe.

Handelsbanken ad.indd 1 18/08/2009 10:24

8 Copyright 2009 © Oliver Wyman

While the investment management industry has been growing in Asia, local managers tend to be smaller than their Western counterparts. Small asset management firms limit the market for full-service vendor solutions and reinforce the dominance of lower cost systems like Bloomberg and Trading Screen. International buy side firms, however, have been expanding their base in Asia. Since they tend to be larger and less price sensitive than local firms, they represent a potential source of growth for technology vendors.

Total hedge fund assets in 2007 were $106 billion, mostly comprised of funds from the Japanese, Australian, Hong Kong, and Singapore mar-kets. Australia has the largest proportion of hedge fund assets with $38.6 billion. Hong Kong is also home to a large share of hedge funds due to its proximity to high potential emerging markets like China and India. Since 2005, Singapore has seen significant growth in market share from 8% to 16%. This is partly due to regulations and tax struc-tures that make the country attractive to hedge funds. For example, a number of Japan-based hedge funds moved their operations to Singa-pore in order to avoid regulatory scrutiny and take advantage of favorable tax structures. Japan now has a market share of 16% versus 22% in 2005.

Figure 3: 2007 Hedge Fund Assets Under Management in APR

Source: LCA GroupAs of June 30th, 2007

2007 Hedge Fund Assets Under Management in APR(Total : $106 bn)

Japan17.3 bn, 16%

Singapore 16.5 bn, 16%

Other 5.0 bn, 5%

Australia38.6 bn, 36%

Hong Kong 28.2 bn, 27%

2007 Hedge fund assets under management in APR

(total: USD 106 billion, as of June 2007)

SOURCE: LCA Group

fund industry developing in China. It’s not next year, but I think in the next five to 10 years, I don’t see why not,” he says. Indeed, with hedge fund activity picking up in Asia post-credit crunch, as it has in the rest of the world, the industry in Asia as a whole has a “bright future”, according to Gordon. “These are emerging markets and they are emerging and I certainly believe that that represents opportunities for hedge fund managers, as well as obviously opportunities for institutions like the Bank of New York Mellon that are seeking to service hedge fund managers or private equity managers or any other participants in the Asian financial markets.” The Asian hedge fund segment may still be immature with many obstacles to overcome before it can compete with the European and US markets. But whether or not it will emerge as a global leader in the industry or will take a smaller role in the worldwide number of funds, the range of services available for Asian funds is as broad as the continent itself. n

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ISJ Investor Services Journal Panel Debate

investor mentality shift towards more long term investing and more particularly towards fund structures, requests for fund administration services have increased accordingly.

SMITH: We have certainly seen an increase in the number of Asian and Latin American based funds that we administer. Overall this makes up a small percentage of our clients, both in terms of assets and total number of funds, but it continues to grow. Lately we have been seeing more start-ups in Latin America than from the more mature US market.

FEFFER: Locally managed funds in Asia have been a fast-increasing segment of the market for us for some time now, although along with the rest of the market growth there slowed during the first half of 2009. We are once again seeing local launches and are noticing significant investor interest. Locally managed funds in Latin America are far fewer in number, although increasing. LaCrosse has announced several new clients in both Asia and Latin America in recent months, including Cavenaugh Capital (Asia), Flowering Tree Invest-ment Management (Asia), Tahan Capital Management (Asia) and Noctua Asset Management (Latin

America).

2.Are you seeing more or less business from fund start-ups?

BRAEKVELT: The global financial turmoil has probably been the largest defining event in recent times for the fund industry. Where before the slowdown, the introduction of new and innovative structures as well as new fund launches were common place, this momentum almost came to a halt recently. Once the dust settles, however, we expect Asia to resume its lead-ing role as a growth engine for the fund segment and a centre of choice for the introduction and distribution of on-shore, off-shore and alternative fund products. Given the increased risk aver-sion from the investor com-munity, the recent focus has been directed more towards well established domestic and global fund companies. For asset managers in emerging markets, licensing, application and registration of new products has proven to be somewhat time consuming which has, at times, limited their ability to introduce innovative and competitive fund structures or to create a deep brand name recognition. In line with future expectations though, we expect that start up

or niche fund providers may gain increasing interest.

SMITH: The first half of this year was slow in terms of fund start-ups, but things have definitely picked up in the second half of the year, and we have seen a significant flurry of new start-ups in the last couple of months.

FEFFER: More business from start-ups recently, after a pause during the credit crisis.

3.In developed markets, the fraud of Bernard Madoff and an emphasis on accountability has meant third-party administra-tion is a high priority for many fund investors. Is there an equivalent drive for this in the emerging markets in which you operate?

BRAEKVELT: In all regions, including Asia, in reaction to general macro economic trends as well as to some very specific market events, investors have been forced back to the basics, rediscovering the fundamental risk – reward theorem. As a result, new or improved practices are introduced into the asset allocation and service provider review processes to assess and mitigate counter-party, market and business risk and the increased market and

investor sophistication, the regulatory disclosure and reporting requirements have driven fund managers to look at outsourcing middle and back office functions to reputable, independent third parties. SMITH: There is certainly a heightened focus on the fidu-ciary aspect of running a hedge fund. On an institutional level, there is no difference between what Asian/Latin American investors are looking for compared with the rest of the world. The things that underline their priorities right now are independence and transparency.

FEFFER: Regardless of where the fund manager sits, man-ager accountability is an issue. Investors worldwide are asking questions about administra-tion, valuation and custody arrangements, and are with-holding investments when they do not like the answers.

4.What other demands are made from local/foreign clients in these emerging markets?Given the more stringent due diligence and review process-es, the sales process has been extended significantly.

Nordic Custody ServicesAnnika Larsson - Head of Relationship Management & SalesTelephone: +46 8 7018141Mail: anni51@handelsbanken.se

Flexibility on a solid groundHandelsbanken Nordic Custody Services is locally present in all the Nordic markets, and offers a wide product spectra to a diverse client base. Handelsbanken is one bank throughout the region and we pride ourselves on being the most flexible provider of custody and clearing services in the region. We are also one of the highest rated private banks in Europe.

Handelsbanken ad.indd 1 18/08/2009 10:2430-39 ISJ42.indd 37 19/08/2009 16:18

38

Panel Debate ISJ Investor Services Journal

Majid Al RefaiCEO

UNICORN INVESTMENT

BANK

Dr Henry AzzamCEO MENA

DEUTSCHE BANK

Mohammed El-KuwaizCo-Founder

DERAYAH

Ibrahim bin Mohammed AlAlwan

Deputy CEO & VP AssetManagement

KSB CAPITAL GROUP

Farah FoustokCEO

ING INVESTMENTMANAGEMENT MIDDLE EAST

2009Middle East

SPECIAL GUEST SPEAKER

Diplomat Radisson SAS Hotel,Manama, Bahrain

Visit: www.icbi-fundforumme.comTel: +44 (0) 20 7017 7200Fax: +44 (0) 20 7017 7807Email: info@icbi.co.uk

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Over 75 ExpertsIncluding:• NCB Capital• HSBC Bank Middle East• Jadwa Investment • Unicorn Investment Bank • Deutsche Bank• Derayah • Mirabaud Cie• Capital Growth Management • KSB Capital Group• Invesco• Blackrock• 3i Capital Group• Man Investments • JP Morgan Asset Management• Shuaa Asset Management• Emirates NBD• Barclays Private Banking• National Bank of Abu Dhabi• MSCI Barra • FundQuest • bfinance• Mercer• SEI• Funds@Work• SwissLife • Cerulli• UGB Securities• ICICI Bank• Silk Invest • MENA Capital • Strategic Insight• Mashreq Capital • Argyll Investment Services Guernsey• CAPM Investment• NYU in London• CAAM Saudi Fransi • Gryphon Investment Bank• Tharwa Management Consultancy• Credit Suisse• DST Global Solutions• Thomson Reuters• Princeton Financial Systems• Morgan Stanley• LM Investment Management Ltd• Guernsey Finance• Bermuda International Business Association• BNY Mellon Asset Servicing • Bahrain Economic Dvelopment Board • Swift • Beltone Financial• Liquidity Management Centre• Fidessa Latent Zero• Pharos Financial Group• Standard Chartered• ING Investment Management Middle East • Schroders• Ajeej Capital• Royal Skandia• Franklin Templeton• Arcapita• Oasis Capital Bank• Citi• Securities & Investment Company (SICO) • Capital Management House• Barclays Global Investors• Al Rayan Investment • Central Bank of Bahrain• Allfunds• Pioneer Investments• Samba Financial Group• iShares• AK Asset Management Inc. • Emirates Investment Services• Arqaam Capital• Merrill Lynch International Bank• Robeco

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Richard LepereCEO

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MASHREQ CAPITAL

Dr Akram YosriManaging Partner/Chairman

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Tarek SakkaCEO

AJEEJ CAPITAL

Fadi TabbaraCIO

JADWA INVESTMENT

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BRAEKVELT: Recent client de-mands, trends and opportunities are centered on, amongst others, an increasingly bi polar investor focus balancing protection con-cerns with return generating asset allocations as well as a growing need for real time, sophisticated data as well as for risk analytics, investment guideline, exposure and drill down reporting. In addition, market participants are looking at leveraging sophis-ticated distribution strategies, with banks continuing to be the main intermediaries and greater product transparency, for example the recent interest in ETFs. For providers in emerging markets, in turn, this requires an increasingly tailored product and service offer-ing around specific client require-ments, pricing or legal needs, often combining their hedge fund and traditional custody and cash platforms.

SMITH: Liquidity is quite impor-tant to Brazilian based investors and therefore we often see funds allowing monthly redemptions and sometimes even daily or weekly subscriptions. Specific to the Brazilian market, often a fund will be set up with a single investor – a local fund – and provide daily NAV calculations. This set up is to take advantage of the CVM instructions 450 and 456 which allow the local fund to invest up to 20% of its assets abroad.

FEFFER: The primary demand is familiarity with the local markets and expertise in the instruments and market conventions that are used to access them. Many emerging markets instruments have unusual features and specific requirements, and working with a firm that understands this and has relevant experience can help avoid problems once a fund is up and running. Also, especially with the recent changes in the prime broker-age space, fund managers are frequently left to arrange for their own access to markets. Working with a partner that can either fa-cilitate that access or provide the operational flexibility to pursue multiple options is critical

5.Amid changing global regula-

tion, have legal services and related advice become part of the administrative package by default?

BRAEKVELT: Throughout Asia, but primarily in the emerging mar-kets, the authorities and regula-tors continue their cautious approach to building out the domestic capital market. Overall, the regulators have greatly sup-ported ongoing liberalization and diversification efforts and are expected to continue to do so, once the immediate concerns about stabilizing the domestic markets have been addressed. From an investors perspective, many institutions pay consider-able attention to risk manage-ment strategies and particularly to data management processes – a relatively new development for Asia.

SMITH: Our focus continues to be on administration and related value-added services, in order that we can anticipate our clients’ needs and invest in new products and services ahead of regulatory and investor requirements. We also work with the industry in its evolution and decision-making processes, and try to represent clients’ views as standards develop.

FEFFER: We do not provide any legal services or advice.

6.Various market surveys have found lesser levels of technol-ogy spending and straight through processing rates among emerging market firms. How would you compare the infra-structure of emerging markets’ bank technology regarding key administrative procedures - eg, investor reporting, P&L report-ing – compared with ‘Western’ institutions?

BRAEKVELT: A key challenge to growing and servicing fund prod-ucts in Asia is the fragmented nature of the region. As such, ongoing investments in people and technology both in good and challenging times are critical to the long term success of securities servicing providers. As in most emerging markets,

the system infrastructure is fo-cused on and tailor made to meet the requirements of the domestic market, additional investments will be required to link those up with the infrastructure in the global markets or its market participants. On the other hand, however, given the rapid evolution of the investment community and markets, some of the emerging market providers are evaluating state of the art technology and data solutions. The ongoing challenge, how-ever, will remain for the back office infrastructure to keep pace with the speed and extent of the changes in the front office. If the recent market disrup-tion has illustrated something, it would be the fact that many institutions may perhaps not be as well equipped to handle post-trade processing and related activities in-house as they might have thought.

SMITH: From our perspective, as the administrator who obtains independent P&L and trad-ing information of a Fund from its custodian or prime broker, generally speaking the methods of providing this information are not comparable to ‘Western’ institutions. With a US based bank, logging in through a secure reporting portal is the common method of obtaining this infor-mation – that level of technology is not yet commonplace in Latin American banks.

FEFFER: We use the same technol-ogy and the same administrative procedures with our emerging markets activities as with major markets. We operate out of four major hubs: Minneapolis, London, Singapore and Buenos Aires, with all of our hubs on a common, integrated, global technology platform.nsurance markets. Again, our presence in China is not new — State Street has operated in Hong Kong for more than 25 years and we have been actively involved in the Chinese financial landscape since 1997, working with many of the country’s leading financial institutions. n

“Once the dust settles, we expect Asia to resume its leading role as a growth engine for the fund segment and a centre of choice for onshore, offshore and alternative fund products”

FrancisBraekvelt,BNY Mellon

“Lately we have seen more fund start-ups from Latin America than from the more mature US market”

T. Andrew Smith,ButterfieldFulcrum

01 11 21 31 4112 32 4203 13 23 33 4304 14 34 4405 15 25 35 4516 26 36 4607 17 27 37 4708 18 28 38 4809 19 29 3910 20 30 4002 06 22 24

30-39 ISJ42.indd 38 19/08/2009 16:18

Majid Al RefaiCEO

UNICORN INVESTMENT

BANK

Dr Henry AzzamCEO MENA

DEUTSCHE BANK

Mohammed El-KuwaizCo-Founder

DERAYAH

Ibrahim bin Mohammed AlAlwan

Deputy CEO & VP AssetManagement

KSB CAPITAL GROUP

Farah FoustokCEO

ING INVESTMENTMANAGEMENT MIDDLE EAST

2009Middle East

SPECIAL GUEST SPEAKER

Diplomat Radisson SAS Hotel,Manama, Bahrain

Visit: www.icbi-fundforumme.comTel: +44 (0) 20 7017 7200Fax: +44 (0) 20 7017 7807Email: info@icbi.co.uk

ICBI

Paper sourcedfrom sustainable

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Hear Insights From Over 25 Industry CEOs & Thought Leaders Including:

Don’t Miss The Unique Features Which Make FundForumMiddle East A Must-Attend Event In Difficult Times

Guest Academic AddressA Geo-Strategic Analysis Of Factors

Impacting Oil & Gas: What Will Impact The Future Shape Of Oil,

Gas And The Investment Landscape In The Middle East

Hagai Segal, Lecturer/Professor, Analyst and Consultant in Middle Eastern AffairsNEW YORK UNIVERSITY IN LONDON

Determining The Future Shape Of The Middle Eastern Investment Management Industry In A Changing World

Media Partner

Endorsed by

50% Discount

For 3rd & Subsequent

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Re-Inventing Your Brand To Stay Ahead In The GamePeter DraperFormer Director of MarketingMANCHESTER UNITEDFOOTBALL CLUB

ISJ readers SAVE an extra

£100on top of early

booking discountsavailable.

Quote VIP code:KR2214ISJAD

Over 75 ExpertsIncluding:• NCB Capital• HSBC Bank Middle East• Jadwa Investment • Unicorn Investment Bank • Deutsche Bank• Derayah • Mirabaud Cie• Capital Growth Management • KSB Capital Group• Invesco• Blackrock• 3i Capital Group• Man Investments • JP Morgan Asset Management• Shuaa Asset Management• Emirates NBD• Barclays Private Banking• National Bank of Abu Dhabi• MSCI Barra • FundQuest • bfinance• Mercer• SEI• Funds@Work• SwissLife • Cerulli• UGB Securities• ICICI Bank• Silk Invest • MENA Capital • Strategic Insight• Mashreq Capital • Argyll Investment Services Guernsey• CAPM Investment• NYU in London• CAAM Saudi Fransi • Gryphon Investment Bank• Tharwa Management Consultancy• Credit Suisse• DST Global Solutions• Thomson Reuters• Princeton Financial Systems• Morgan Stanley• LM Investment Management Ltd• Guernsey Finance• Bermuda International Business Association• BNY Mellon Asset Servicing • Bahrain Economic Dvelopment Board • Swift • Beltone Financial• Liquidity Management Centre• Fidessa Latent Zero• Pharos Financial Group• Standard Chartered• ING Investment Management Middle East • Schroders• Ajeej Capital• Royal Skandia• Franklin Templeton• Arcapita• Oasis Capital Bank• Citi• Securities & Investment Company (SICO) • Capital Management House• Barclays Global Investors• Al Rayan Investment • Central Bank of Bahrain• Allfunds• Pioneer Investments• Samba Financial Group• iShares• AK Asset Management Inc. • Emirates Investment Services• Arqaam Capital• Merrill Lynch International Bank• Robeco

Sharia Investment SummitFind Out All You Need To Know About Islamic

Finance And Investment Management.

Moderated by:John A. Sandwick

Specialist in Islamic Asset Management & Securitization

NEW FOR 2009

NEW FOR 2009

Brand New Strategy & Practice Labs - This Innovative And Interactive FormatWill Provide A More Comprehensive Look At Some Of The Key Topics And Allow For More Audience Participation (see p.3)ff

The New FundForum CEO Day - A Unique Opportunity For You To Debate TheFuture For Asset Management With The People Shaping The Industry: Over 25CEOs Already Confirmed (see p. 2)ff

More Time For Structured Networking - Back By Popular Demand – TheFundForum Discussion Roundtables. This Is Your Chance To ExchangeBusiness Cards & Discuss Informally With Some Of Our Key Speakers (see p.3 )

ffNew - Online Appointment System - This Will Allow You To Arrange Key Meetings In Advance Of The Event To Ensure You Meet The People That Count (see p.3) ff

More Industry Insights & Intellectual Take-Away - Hear From RenownedAcademics, Research Analysts And Leading Financial Minds For The MostComprehensive Overview Of The Middle Eastern Investment ManagementBusiness

ff

Richard LepereCEO

CAAM SAUDI FRANSI

Abdul Kadir HussainCEO

MASHREQ CAPITAL

Dr Akram YosriManaging Partner/Chairman

3I CAPITAL GROUP

Tarek SakkaCEO

AJEEJ CAPITAL

Fadi TabbaraCIO

JADWA INVESTMENT

In Partnership With

Associate Sponsors

The New FundForum Economic Briefing - Kick Start Your Conference With TheMost Up To Date Overview Of The Ever-Changing Economic Climate WithSome Of The Region’s Leading Experts (see p.4)ff

OVER 450ATTENDEES

IN 2008

Main Conference: 19-21 October 09Sharia Investment Summit: 22 October 09

KR2214ISJAD:LatAm A3 09 29/7/09 10:38 Page 1

30-39 ISJ42.indd 39 20/08/2009 13:57

ISJ Investor Services Journal ISJ Investor Services Journal ISJ Directory of Services ISJ Investor Services Journal

40

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T: +47 22 94 92 95F: +47 22 48 28 46Contact: Bente I. Hoem, Head of Global Relations & NetworkE: bente.hoem@dnbnor.noW:www.dnbnor.com

Intesa Sanpaolo’s Transaction Services include :• Sub Custody, Derivatives and Remote Membership Clearing• Global Custody and Depository Bank for mutual funds, pension funds, real

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Banking Securities Services provides award winning local and regional custody services for investment professionals. We are proud to be the largest custodian provider in terms of assets and number of foreign clients in Central & Eastern Europe. ING has been providing Securities Services in CEE since 1994 and we will continue our ongoing pursuit of excellence through new technology. Innovation and client focus are the key drivers to service our clients the best way.Other activities of ING Wholesale Banking Securities Services are Paying Agency Services and web-based management of employee stock option & share plans.ING is your local partner in: Belgium, Bulgaria, Czech Republic, Hungary, Poland, Romania, Russia, Slovak Republic and Ukraine.

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Asset Servicing

Custody & Clearing

Consultancy

Goal is widely-acknowledged in the fi nancial services sector for its innovative and creative solutions to highly-specialized niche processes.Goal’s research has shown that in excess of USD8 billion of withholding tax remains unclaimed each year by the rightful owners and benefi ciaries and that over USD12 billion is lost because rightful benefi ciaries are not participating in class actions, bankruptcies and disgorgements.

SMA Financial is the UK’s premier provider of SWIFT services and a long standing business partner of SWIFT. SMA’s vast experience in the banking and securities industry has provided high quality provision of SWIFT related consultancy, training, system care and bureau services which is second to none. SMA prides itself on their in-depth and highly experienced team of consultants chosen from the banking and securities industry. The introduction of the SWIFT bureau service has witnessed much success by providing cost effective and quality hosted connectivity services to many satisfi ed clients.

BHF Asset Servicing GmbH comprises the custody, depotbanking and securities services of BHF-BANK Aktiengesellschaft. With around 250 members of staff, approx. EUR 270 billion in assets under administration and a depotbanking volume of EUR 85 billion, BHF Asset Servicing GmbH is one of Germany’s leading specialists in depotbanking and custody business. It develops innovative and high-class services for investment companies, institutional investors and foreign banks, and excels at tailoring solutions to the individual needs of its clientele.

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Simon MurbyManaging DirectorSMA Financial LimitedTelephone : +44 (0)20 7940 4200Bramah House,65-71 Bermondsey Street,London. SE1 3XFWebsite: www.sma.co.uk

Strahlenbergerstraße 45; 63067 Offenbach a.M. Germany•Contact: Moritz Ostwald •Phone:+49 69 667744 838•Email: moritz.ostwald@bhfassetserv.com

ISJ Directory of Services

Directory ISJ42.indd 40 20/08/2009 10:14

ISJ Investor Services Journal ISJ Investor Services Journal ISJ Investor Services Journal ISJ Directory of ServicesISJ Investor Services Journal

Nordea is the leading fi nancial 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 Nordic and Baltic securities. Due to the unique history of being formed from four established banks, Nordea is the only Nordic custody provider with strong local presence and expertise in all four markets. Nordea combines Nordic competence with local expertise, and has proven ability to deliver high quality services that meet both clients’ and each local market’s requirements. Leading Nordic custodian: Critical mass and resources available; deep local experience and active involvement in each Nordic market; Complete operational capabilities and best-fi t 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.

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41

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 eight sub-Saharan markets.

Standard Bank has assets under custody to the value of ZAR1.56 trillion and an overall market share of approximately 40%.

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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 securities worth over 560 bn EUR and provide services in more that 75 markets, 10 of them under the SEB name (Sweden, Norway, Finland, Denmark, Luxembourg, Germany, Estonia, Latvia, Lithuania and Ukraine). We offer a full range of securities services including corporate action and information services, securities lending and services to remote members of the Nordic and Baltic 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 effi cient. With a history of over 150 years in the securities industry; we know the market and our clients well.

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Santander is Spain’s leading fi nancial institution and the largest bank in the euro zone by market capitalization. Our commitment and contribution to the securities industry is well established after more than a century of providing services in this fi eld.Santander’s cutting edge technology enables it to offer a comprehensive array of innovative services in a broad range of markets. Santander currently has full local capabilities in Iberian and Latin American markets along with a franchised presence in many others. Santander`s experience and product range ensures that every aspect of the securities business is fully contemplated.

T: Europe: (34) 91 2893932 / 28T: USA: (1212) 350 39 02 W: santanderglobal.comE: globalsecurities@ gruposantander.com

A:Standard Bank Investor ServicesSecurities Lending Department25 Sauer Street 2nd Floor, Entrance 3Johannesburg 2001South Africa T: +2711 636 6615E: adam.bateman@standardbank.co.zaW: www.standardbank.co.za

T: +46 8 763 53 04F: +46 8 763 69 30C: Goran Fors, Global Head of Custody ServicesE: goran.fors@seb.seW: www.seb.se

ISJ Directory of Services

Société Générale Securities Services offers institutional investors, asset managers and fi nancial intermediaries a comprehensive range of fi nancial securities services: custody, clearing & trustee services, fund administration, asset servicing and transfer agency. SGSS currently ranks 3rd European custodian and 9th worldwide custodian (Source: Globalcustody.net) with EUR 2,580* billion in assets held and valuates 4,354* funds representing assets of EUR 405* billion (as of June 2007).

Sébastien DanloyGlobal Head of Sales,Investor ServicesSociété Générale Securities ServicesT: +33 (0)1 41 42 98 65E: sebastien.danloy@socgen.comW: www.sg-securities-services.com

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Interactive Data Corporation (NYSE: IDC) is a leading global provider of fi nancial market data, analytics and related services to fi nancial institutions, active traders and individual investors. The Company’s businesses supply real-time market data, time-sensitive pricing, evaluations and reference data for millions of securities traded around the world, including hard-to-value instruments. Many of the world’s best-known fi nancial service and software companies subscribe to the Company’s services in support of their trading, analysis, portfolio management and valuation activities. Through its businesses, Interactive Data Pricing and Reference Data, Interactive Data Real-Time Services, Interactive Data Fixed Income Analytics, and eSignal, the Company has approximately 2,300 employees in offi ces located throughout North America, Europe, Asia and Australia.

SmartCo is a leading provider of data management solutions for the fi nancial industry.SmartCo’s software, Smart Financial Data Hub, covers all the data area, including fi nancial instruments, market data, third parties, funds, transactions, and provides full connectivity, a powerful and user friendly front-end, traceability, quality control, data enrichment and customisable workfl ow. Our solutions are based on SmartPlanet, an innovative technology focused on data management, and able to meet evolving business requirements.SmartCo offers to its customers the ability to respond in the fastest way to regulatory and business changes.

ISJ Directory of Services ISJ Investor Services Journal

www.interactivedata.comT: 020 7825 7800F: 020 7608 3514Brendan BeithEuropean Sales Directoreu-info@interactivedata.comFitzroy House 13-17 Epworth Street London EC2A 4DL UK

For further information: www.smartco.fr or info@smartco.fr

SmartCo37 rue de Liège75008 ParisFranceT: + 33 1 58 22 29 60E: info@smartco.frW: www.smartco.fr

Established in 2002, IMFC Fund Services B.V. is a boutique hedge fund administrator and a trustee with its offi ces in Amsterdam and Sydney. IMFC offers third parties administration and related services to all type of onshore and offshore funds combining high quality, independency, technology, timely calculation with fl exibility, experience, custom-made solutions and competitive rates. Our services include: fund set-up and corporate services, NAV calculation and other accounting services, R&T agent and other investors and compliance services.

ISJ Investor Services Journal

For more information visit our website: www.imfcfundservices.com

www.imfcfundservices.comt +31.20.644.4558f +31.20.644.2735 Mrs. Consuelo Nardone: consuelo.nardon@imfc.nl Rivierstaete Building, Amsteldijk 166, 1079 LH Amsterdam, Netherlands

Fund Administration

With an extensive network that spans over 70 countries, well-positioned in the emerging trade and investment corridors across Asia, Africa and the Middle East, Standard Chartered’s Wholesale Banking business combines global capabilities with local expertise to develop innovative products and services to meet the diverse needs of our corporate and institutional clients in some of the world’s most dynamic markets. Building on a rich banking heritage, Standard Chartered is noted for a client-focused approach to business, unmatched on-the-ground expertise and a solid track record of innovative, award-winning financial services solutions, reflecting our continued commitment to power our clients’ ambitions. As one of Asia’s leading custodians, Standard Chartered serves global, regional and 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 Managers are focused on personalized processing and reporting solutions. Other Features:• ISO9001:2000 quality certifi cation.• Swedbank Markets Online (SMO) internet information and reporting tool for

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

T: +46 8 5859 1800F: +46 8 7237 147C: Neal Meacham, Head of CustodyE: neal.meacham@swedbank.comA: Stockholm SE 105 34 Sweden

Data Services

Market Data & Analytics provides high-value real-time market data, indices and back offi ce services. Information from diverse sources are provided to its customers, tailored to their specifi c information needs. Accuracy and reliability are ensured by collecting the data from the Group’s own trading platforms, such as Xetra® and Eurex® and cooperation partners like STOXX Ltd. and the Irish Stock Exchange. Avox®, a majority-owned subsidiary, validates, corrects, enriches and maintains business entity data. With an operational model, unique in the industry, Avox® enables clients to comply with regulatory requirements and to achieve a holistic view of the risk exposure towards a client.

Avox Redwither Tower Redwither Business Park Wrexham, LL13 9XT United Kingdom T: +44 (1978) 661 813 F: +44 (1978) 661 668W: www.avox.info

C: Giles Elliott, Global Head, Securities ServicesP: +65 6517 0134E: Giles.Elliott@sc.comW: www.standardchartered.com

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Drawing upon an extensive track record of profi ciency, dependability and responsiveness, Swiss Financial Services acts as administrator as well as registrar and transfer agent of funds investing in a broad range of fi nancial instruments. These include futures, foreign exchange, equities, options, bonds and other funds.

We perform accounting and administration services for diverse fund types domiciled in, but not limited to, the United States, Bahamas, Cayman Islands, B.V.I. and Ireland.

Société Générale Securities Services offers institutional investors, asset managers and fi nancial intermediaries a comprehensive range of fi nancial securities services: Clearing, Liquidity Management, Custody and Trustee, Fund Administration, Asset Servicing, Fund Distribution Services and Issuer Services. SGSS currently ranks 3rd European custodian and 7th worldwide custodian (Source: Globalcustody.net) with EUR 2,731* billion in assets held and valuates 5,158* funds representing assets of EUR 499* billion (at end March 2008).

ISJ Directory of Services

Fund Services is a dedicated fund administrator providing customized and flexible services for traditional and alternative investments. Our comprehensive range of services for investment funds includes fund set-up, registration and support around the world, fund accounting, NAV calculation, risk control and reporting. We have practical experience with registering funds in 28 jurisdictions.We provide a flexible offering from the full range of services, including Private Labelling, to selected functions. Through our leading fund administration architecture, multi-source pricing and powerful compliance tools, we offer a tailored, cost effective service. www.ubs.com/fundservices

ISJ Investor Services Journal

Luxembourg: Jean-Paul Gennari, tel. +352-44-1010 1Switzerland: Markus Steiner, tel. +41-61-288 4910 W: www.ubs.com/fundservices C: Andre ValenteT: + 41 61 288 6269 E: andre.valente@ubs.comA:UBS Global Asset Management - Fund Services, Brunngässlein 12, PO Box CH-4002 Basel, Switzerland

Swiss Financial Services (Ireland) Ltd. Block 4B,Cleaboy Business Park, Old Kilmeaden Road, Waterford, Ireland T: +353 51 351180F: +353 51 871595

Adrian Maher E: amaher@swiss-fi nancial.ie

Sébastien DanloyGlobal Head of SalesSociété Générale Securities ServicesT: +33 (0)1 41 42 98 65E: sebastien.danloy@socgen.comW: www.sg-securities-services.com

Hedge Fund Administration

Apex Fund Services Ltd is a global hedge fund administration solution for hedge funds and private equity clients located in 12 separate jurisdictions across the globe. The company uses the software solution, PFS PAXUS, which is a fully integrated hedge fund accounting system combined with web-based reporting to allow clients and investors to access their information 24/7 securely online. We will tailor all solutions to meet your needs and our continuing focus on the quality of service and the relationship with each and individual client ensures that we retain our ethos of providing a personalized service rather than a generic solution. Highly qualifi ed and experienced staff, mirrored with top tier technology and competitive fee structures make Apex Fund Services Ltd the clear choice for your fund administration needs.

C: Peter HughesGroup Managing DirectorT: +1 441-292-2739F:+1 441-292-1884E: peter@apex.bmJohn BohanGroup Manager of OperationsT: +353 21 4633366F: +353 21 4633377E: John@apexfunds.ie

Custom House, which is one of the world’s largest independent alternative investment and hedge fund administrators, was awarded a SAS 70 Type I in May 2007 and a SAS 70 Type II in December 2007.Custom House offers a round-the-world, round-the-clock service from its offi ce in Dublin and representative offi ces in Chicago and Singapore, enabling it to provide, not only complete global administration services, but also the ability to produce daily dealing NAVs.Custom House is authorised by the Irish Financial Regulator under Section 10 of the Investment Intermediaries Act, 1995, which authorisation does not extend to the Chicago and Singapore representative offi ces.

Custom House Administration & Corporate Services LimitedA: 25 Eden Quay, Dublin 1, IrelandT: +(353) 1 878 0807F: +(353) 1 878 0827C: dermot.butler@ customhousegroup.comC: david.blair@ customhousegroup.comwww.customhousegroup.com

Intesa Sanpaolo’s Transaction Services include :• Sub Custody, Derivatives and Remote Membership Clearing• Global Custody and Depository Bank for mutual funds, pension funds, real

estate funds, private equity funds and hedge funds• Fund Administration for mutual funds, pension funds, real estate funds,

private equity funds and hedge funds• Paying Agent for foreign funds and sicavs• Cash and Payment services like swift to checks, mass payments, checks and

cash letters

Piazza della Scala 620121 Milan, ItalyT: +39 02 8794 2466F: +39 02 8794 1519W: intesasanpaolo.comC: Riccardo LamannaE: riccardo.lamanna@intesasanpaolo.com

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Newedge Global Prime Brokerage Group is a global, multi-disciplinary, solution-providing team dedicated to delivering superior services to alternative investment industry participants including hedge funds, commodity trading advisors (CTAs), fund of hedge funds, family offi ces, and institutional investors (insurance companies, banks and pension funds). The Newedge prime brokerage team offers a global range of brokerage services covering a wide range of asset classes including equities, bonds, currencies, commodities, and their related listed and OTC derivative products. We also offer an innovative portfolio-based cross-margining solution, a dedicated account management desk, hedge fund start up services, quantitative information on the hedge fund industry, capital introductions services, and recently prime brokerage services to Sharia compliant hedge funds. Newedge is wholly owned by Calyon and Société Générale, with both companies having 50% ownership.

Prime Brokerage

ISJ Directory of Services

Data Explorers (www.dataexplorers.com), based in New York and London, is the world’s most complete resource for data, analysis and insight into securities lending and short selling. The company’s proprietary data gives an unrivalled, comprehensive view on share lending and short-selling activity. With data sourced directly from securities lending desks of over 100 of the top lending fi rms and representing most of the global securities lending market, Data Explorers has built a reputation with leading fi nancial institutions as the source for short intelligence that informs their decision-making and their coverage of market sectors and companies. Please visit our Blog: dataexplorers.com/news, Twitter, twitter.com/dataexplorers, Video dataexplorers.com/daily-briefi ng and LinkedIn linkedin.com/companies/data-explorers sites.

ISJ Investor Services Journal

Securities Lending

EquiLend is a leading provider of trading services for the securities fi nance industry. EquiLend facilitates straight-through processing by using a common standards-based protocol and infrastructure, which automates formerly manual trading processes. Used by borrowers and lenders throughout the world, the EquiLend platform allows for greater effi ciency and enables fi rms to scale their business globally. Using EquiLend’s complete end-to-end services, including pre- and post-trade, reduces the risk of potential errors. The platform eliminates the need to maintain costly point-to-point connections while allowing fi rms to drive down unit costs, allowing fi rms to expand business, move into different markets, increase trading volumes, all without additional spend. This makes the EquiLend platform a cost-effi cient choice for all institutions, regardless of size.

ISJ Investor Services Journal

Philippe Teilhard de Chardin, Global Head of Prime BrokerageT +44 20 7676 8536Vincent Tournant, Head of Business Development T +44 20 7676 8171Duncan Crawford, Head of Capital Introductions T +44 20 7676 8504E: pbinfo@newedgegroup.comwww.newedgegroup.com/primebrokerage

UK: 2 Seething Lane, London, EC3N 4AT T +44 (0) 20 7264 7600, F +44 (0)20 7392 4004 US: 75 Rockefeller Plaza, 19th Floor New York, 10019, USAT +1 212 710 2210 F + 1 212 710 2212 Julian Pittam T +44 (0) 207 264 7616 E:julian.pittam@dataexplorers.com New York: Ken Read T +212 710 2210 E: kenneth.read@dataexplorers.com www.dataexplorers.com

www.equilend.comEquiLend Europe Ltd.14 Devonshire SquareLondon, EC2M 4TE+44 (0) 207 426 4426T: UK- +44 (0)20 7743 9510C: Michelle LindenbergerE: michelle.lindenberger@equilend.comA: 17 State Street, 9th Floor New York, NY, 10004T: US- +1 212 901 2224C: Michelle LindenbergerE: michelle.lindenberger@equilend.com W: www.equilend.com

Fund Services holds a leading position in the area of hedge fund administration with specialized teams around the world. We offer a complete range of services including accounting, NAV calculation, shareholder services, banking and credit facilities. With specialist expertise in both single manager and fund of hedge fund administration, services can be provided for both onshore and offshore funds. Through our comprehensive range of services and products, leading edge technology platforms and superior client service, we work in partnership to offer the solutions you need.

Cayman Islands: Darren Stainrod, tel. +1-345-914 1076Eire: Don McClean, T: +353-1-436 3636US: Concetta Mastrangelo, tel. +1-212-882 5523 W: www.ubs.com/fundservices C: Darren Stainrod, T: ++1-345-914 1076E: Darren.stainrod@ubs.comA: 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 of Q3 2006 the BVI had recognised or registered more than 4,000 funds, and licensed some 700 managers and administrators, making the BVI a leading domicile of choice for investment business. Benefi ts of conducting investment business in the BVI include:• Fast-track registration and licensing system - funds can be registered in a few days.• Presence of qualifi ed, experienced legal, accounting & administration practitioners.• A well-developed corporate professional infrastructure.• Modern, robust and cost-effective regulatory and corporate regimes.• BVI private and professional funds fall outside the scope of EU Savings taxation Directive.• Segregated Portfolio Companies - also known as Protected Cell Companies - can now be

formed as mutual funds under the BVI Business Companies Act 2004.

British Virgin Islands International Finance CentreHaycraft Building1 Pasea EstateRoad TownTortolaBritish Virgin IslandsT: +1 284 494 1509F: +1 284 494 1260W: www.bviifc.gov.vg

Payments & Settlements

VocaLink is the payment transaction specialist. Trusted by the world’s top banks our automated payment system processes over 90 million transactions per day. The VocaLink switching platform powers the world’s busiest ATM network and provides end-to-end management of Europe’s largest ATM estate, while the Real-Time Payments platform provides the central infrastructure for the UK Faster Payments service. The VocaLink EuroCSM delivers reach for our clients throughout the SEPA 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 with BGC to process Sweden’s automated payments. Find out how we can help your business at www.vocalink.com

VocaLinkDrake HouseHomestead RoadRickmansworthHertfordshireWD3 1FX

T: +44(0)870 1650019F: info@vocalink.comW: www.vocalink.com

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FINACE® is the only fully integrated solution today which supports the future business model within the area of Securities Finance and Collateral Management. The architecture of FINACE® is based on a stable, leading edge technology platform, which was developed with performance and robustness as the focus of design. With fl exibility at its core, customer-driven extensions and modifi cations can be quickly and easily applied to the standard component set.

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, mutual funds, investment managers and insurance companies. They are a third party industry specialist providing lenders with customized programs, high touch client service, comprehensive risk management, and superior risk adjusted returns. The fi rm takes a highly consultative approach with their clients by structuring separate, non-pooled programs and utilizing a competitive auction to determine the optimal route to market for their clients’ lendable assets. Having built their business to incorporate investment practices such as the use of specialists, multiple-managers, unbundling, price transparency, and competition, their approach ensures best execution and also provides clients with greater control over their programs, allowing them to more effectively monitor and mitigate risks and counterparty relationships.

Santander is the only Spanish fi nancial institution with a team exclusively dedicated to securities fi nance & with the purchase of Abbey in 2004 has expanded its capacity on a Global basis with trading teams in London (UK) & Connecticut (USA).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 & fi nancing, including availability across all assets classes, as well as access to uncommon emerging markets.

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 funding products, such as Eurex Repo. Eurex Repo is among the forerunners in providing integrated trading and clearing for repo transactions. Eurex’s latest innovative marketplace is called Eurex SecLend. Eurex SecLend. Europe’s leading investment banks participate as borrowers in the Eurex SecLend marketplace, acting as principal brokers, dealers and intermediaries. They all benefi t 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.

JPMorgan’s Securities Lending program is unparalleled due in no small part to the Firm’s breadth of capability, fi nancial strength, professional expertise and seamless operations. Our program enables investors to access a broad spectrum of lending markets, with a diverse borrower base, offering a broad indemnifi cation against borrower default, while achieving very competitive bids for their securities - all of this in an environment designed not to compromise the activities of their fund managers. As one of the founding members of EquiLend, a global automated platform for borrowers and lenders, JPMorgan is at the forefront of technology and is ideally placed given its integrated lending, custody and accounting platforms.

ISJ Directory of ServicesISJ Investor Services Journal

T: US- +1 617 204 4500T: UK- +44 (0)20 7469 6000C: Christopher JaynesE: info@eseclending.comW: www.eseclending.comA: 175 Federal Street, 11th FL, Boston, MA 02110, US

A: 1st Floor, 10 King William Street, London EC4N 7TW, UK

W: www.eurexseclend.comT: +41 58 854 2066F: +41 58 854 2455E: info@eurexseclend.comEurex Zurich Ltd., Selnaustrasse 30, 8021 Zurich, Switzerland

T: +41 (0)44 298 92 00F: +41 (0)44 298 93 00A: COMIT AG, Pfl anzschulstrasse 7,CH-8004 Zürich, SwitzerlandW: www.fi nacesolution.comwww.comit.ch

New York: William Smith T: 212-623-5664 E: william.z.smith@jpmorgan.comLondon: Michael Fox T: 44 207 742 0256E: michael.uk.fox@jpmorgan.comSydney: David Brown T: (61-2)92504606 E: david.ldn.brown@jpmorgan.com W: www.jpmorgan.com/wss

W: www.gruposantander.comT: (3491) 289 39 42/54E: securitieslending@ gruposantander.com

Around the world, securities fi nancing is managed on SunGard’sproven solutions for international and U.S. domestic securities lending and repo for over 250 clients. Through our Loanet, Global One, Martini and Astec Analytics products and services, we provide comprehensive business solutions and information with worldwide reach for equities or fi xed income securities fi nancing. These solutions – all in an integrated, exception-based processing architecture – includes order routing, pre-trade analytics, trading, position management, operations, accounting, settlement and reconciliation.

Email: securities.fi nance@ sungard.comContact:EMEA: +44 (0) 20 8081 2779America’s: +1 (646) 445-1179Asia Pacifi c: + 62276400Visit: www.sungard.com/securitiesfi nance

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Financial Tradeware provides integrated solutions for medium to small sized Investment Management fi rms, Fund Managers and Hedge Funds, covering the full trade life cycle. It is part of the Dharma Group of companies and benefi ts from the joint contributions and experiences within the group of market traders, business analysts, fi nancial services professionals and skilled Microsoft Certifi ed programmers. The company has developed a suite of applications that integrate and Straight Through Process (STP) real-time trading, back offi ce administration, accounting and compliance. Ultra.net®, S-Messenger® and H-Fund® arwe the company’s fl agship products all based on Microsoft.NET infrastructure. 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.

ISJ Directory of Services ISJ Investor Services Journal

SunGard is one of the world’s leading software and IT services companies. SunGard serves more than 25,000 customers in more than 70 countries, including the world’s 25 largest fi nancial services companies.

Dedicated to post trade securities operations, GL RIMS is your comprehensive real time securities post execution processing solution, covering middle offi ce, settlement and accounting requirements. Its wide use of automation enables global capital markets organisation to achieve maximum STP. It is a fl exible, highly scalable and easy to install platform with a new Service Oriented Architecture feature that allows smooth and effi cient connections with other third parties within a company.

ISJ Investor Services Journal

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, and pension and endowments, etc…. Our integrated solution services the front, middle, and back offi ces of these companies with software that accommodates most any security type. Built on a contemporary three tiered architecture our application helps fi nancial companies improve operating effi ciencies, increase accuracy and reliability and improve customer service.IsisFS has the experience and IMS has the tools to improve your operations and save you money.

W: www.f-tradeware.comT: +44 (0)20 7493 2773F: +44 (0)20 7495 4858C: Graham BrightE: info@f-tradeware.comA: 31 Dover Street London W1S 4ND UK

Contact:Isis Financial Systems14 Felton StreetWaltham, MA 02453Sales@IsisFS.com (00-1) 781-209-0262

SunGard Global Trading25 Canada Square, London E14 5LQ

Tel +44 (0)20 8081 2000

Fax +44 (0)20 8081 3399

www.sungard.com/globaltrading

Email: info.globaltrading@sungard.com

DST International is the world’s premier vendor of technology solutions to the global investment management community with over 700 clients in 55 countries, and 1500 employees in 19 of the world’s leading financial centres. Our wide range of asset management solutions meet the needs of fund managers, dealers, settlement staff, custodians and record keepers operating as international asset managers; from front office simulation, opinion management and modelling functions, through data management, dealing and settlement to custody and corporate actions. The suite of products can be used either as stand-alone applications or brought together in flexible combinations according to specific needs.

T: UK +44 (0)20 8390 5000Boston +1 617 482 8800Hong Kong +85 225 812 880F: +44 (0)20 8390 7000E: info@dstintl.comA: DST House, St Mark’s Hill, Surbiton, Surrey, KT6 4QDW: www.dstinternational.com

Eagle Investment Systems LLC is a global provider of fi nancial services technology, serving the world’s leading fi nancial institutions. Eagle’s Web-based systems support the complex requirements of fi rms of any size including institutional investment managers, mutual funds, hedge funds, brokers, public funds, plan sponsors, and insurance companies. Eagle is committed to providing enterprise-wide, leading-edge technology and professional services for investment accounting, data management, and performance measurement. Eagle’s product suite is offered as an installed application or can be hosted via Eagle ACCESS, Eagle’s application service provider. Eagle Investment 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.

W: www.eagleinvsys.comT: +44 (0) 20 7163 5700F: +44 (0) 20 7163 5701A: The Bank of New York Mellon Financial Centre160 Queen Victoria StreetLondon EC4V 4LA

Technology

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 renowned asset managers in France, Belgium, Luxembourg, UK, Hong Kong and Singapore who have assets under management ranging from 10 to 450 billion Euros. The B-One suite of products covers: performance measurement, performance attribution (equities, balanced and fi xed income), risk attribution (ex-post and ex-ante), as well as multi-lingual client reporting and factsheets. This suite of products can be used either as stand-alone applications or ASP hosted solutions. The Company has approximately 45 employees in offi ces located in Europe (Paris, London, Luxembourg). Offi ces in Asia and North America are under consideration. The Company is headquartered in Paris.

A: BI-SAM Ltd1 CornhillLondon EC3V 3NDT: +44 (0)20 3008 5834F: + 44 (0)20 3008 5831E: marketing@bi-sam.comW: www.bi-sam.com

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Information Mosaic is a global provider of advanced custody, corporate actions and wealth management solutions to the global securities industry. Information Mosaic’s business professionals leverage decades of fi nancial industry expertise and technical knowledge to deliver complex projects on time and within budget. Since inception, the company has utilized the most modern technology to develop solutions to run on a scalable, single platform. Today, Information Mosaic supports clients from offi ces in Boston, Dublin, London, Luxembourg, New York and Singapore. Currently, six of the top 10 global custodians deploy Information Mosaic solutions worldwide.

IGEFI is the foremost provider of software solutions for international fund promoters, third-party service providers and fund managers. Its prestigious client-base is testimony to our commitment, service and quality with more than 200 expert staff supporting clients from seven offi ces worldwide including Bangalore, Boston, Frankfurt, Geneva, London, Luxembourg and Paris. MultiFonds is operational in more than 20 countries worldwide and support investment funds assets in excess of US$ 2 trillion. MultiFonds Fund Accounting and MultiFonds Transfer Agency are developed on a “one system-one database” philosophy and provide signifi cant advantages including reduced overhead and IT support costs and single look and feel reporting for global clients.

ISJ Directory of ServicesISJ Investor Services Journal

For more information on Information Mosaic, please visit our website at www.informationmosaic.com Global:emullan@informationmosaic.com, US: emadigan@informationmosaic.comEurope: aleyder@informationmosaic.comAsia: djennings@informationmosaic.comGeneral Enquires:jfl ett@informationmosaic.com

A:IGEFI Group Sàrl - 7, Rue des Primeurs,L-2361 StrassenT: +352 26 44 211 F: +352 26 44 21 44E: marketing@igefi .comW: www.igefi .comC: Mr. Jesper Steiness - Head of Business DevelopmentEurope & AsiaE: jesper.steiness@igefi .com

For more than a decade, administrators, managers, and advisors have reliedon KOGER for dependable software tools backed by extensive industryexperience and expertise. Now, for those who want to reduce costs and streamline business processes, Koger offers Fully Integrated FundAdministrator, a vertically integrated suite serving the back-offi ce software needs of the fund industry.Fully Integrated Fund Administrator consists of three core programs:~ NTAS, the New Transfer-agency System~ E*TAS, Electronic Transfer Agency System~ GRID, Global Reach Interface DaemonOther programs, such as PTAS, KIT, and KORS available separately, complement the core competency of Fully Integrated Fund Administrator.

T: 001-201-291-7747 F: 001-201-291-7808C: Mr Ras SipkoE: ras@kogerusa.comKOGER USA12 Route 17 NorthSuite 111ParamusNew Jersey, NJ 07652, USAW: www.kogerusa.com

Misys provides integrated, comprehensive solutions that deliver signifi cant results to over 1,200 fi nancial 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, multi-asset class solution that boasts 18 years OTC derivatives market expertise. 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.

www.misys.comtcm.marketing@misys.com

Odyssey Financial Technologies is an industry leader in the global provision of wealth and asset management solutions and services to the Private Banking, Mass Affl uent and Retail Banks as well as Institutional and Fund Managers. Over 200 fi nancial institutions in more than 30 countries have chosen Odyssey solutions. Odyssey focuses on providing a comprehensive range of components for portfolio management (PMS), advisory process, customer relationship (CRM), compliance, risk, analytics and Enterprise Data Management (EDM). The components are deployed on a single scalable wealth and asset management platform, facilitating the enterprise-wide implementation of solutions and data management. Founded in Luxembourg in 1995, Odyssey today has offi ces in the key fi nancial centers, including London, New York, Singapore, Zurich, Frankfurt, Brussels, Geneva, Madrid, Toronto and Tokyo. Odyssey’s operational head offi ce and main development centre is located in Lausanne, Switzerland. Throughout this knowledgeable network Odyssey employs over 600 professionals.

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 the most complex derivative products. Coupled with a high degree of fl exibility and customization, Mx Asset Manager features a multifaceted design catering to the needs of both service providers (prime brokers, administrators, asset servicing providers) and direct clients (portfolio 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.

C: Hélène Desbiez Business Development ManagerT: +33 1 44 05 32 00E: helene.desbiez@murex.comW: www.murex.com

London Offi ce:Martin House5 Martin LaneLondon EC4R 0DP U.K.

T: +44 (0)20 7621 5800F: +44 (0)20 7621 5899

E: info@odyssey-group.comW: www.odyssey-group.com

Technology

Directory ISJ42.indd 47 20/08/2009 10:14

48

ISJ Investor Services Journal ISJ Investor Services Journal ISJ Directory of Services

SimCorp Dimension is a powerful, comprehensive and truly seamless investment management system. It can handle NAV and other calculations, with complete related accounting, for a huge variety of fund structures and product types, including regional specialities. SimCorp Dimension has been designed from scratch as an enterprise-wide system, handling all aspects of the investment management process and related administration functions, consistently. Data is recorded once into a core database so that reporting is made easy, there is no reconciliation of data and no duplication of procedures.-By cutting latency in securities processing, our clients are recognising new effi ciencies, 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.

Founded in 2002, Redi2 Technologies is a leading provider of fee billing solutions to the global fi nancial services industry. Redi2 offers fl exible, feature-rich solutions that help fi rms streamline operations, improve cash fl ow, reduce costs, enhance client service and meet compliance obligations. Redi2’s fl agship fee billing and revenue management solution Redi2 Revenue Manager helps fi nancial professionals more easily manage the fee billing process, including client setup, multi-currency fee and accrual calculations, invoice and advice generation, 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.

ISJ Directory of Services

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

ISJ Investor Services Journal

Redi2 Technologies, Inc.1771 Broadway St.Oakland, CA 94612T: +1 (510) 834-7334E: info@redi2.comW: www.redi2.com

For more information please visit: www.netik.comor email: marketing@netik.com

T: +44 (0)20 7260 1900 F: +44 (0)20 7260 1911 C: Elizabeth Gee, sales director of SimCorp DimensionE: elizabeth.gee@simcorp.comW: www.simcorpdimension.comA: SimCorp, 100 Wood Street, London EC2V 7AN

peterevans is a leading provider of front to back offi ce solutions for the fi nancial 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 replacing costly and restricting legacy platforms. peterevans works in a collaborative manner and sees clients as partners to help meet all the demands in today’s marketplace. The xanite product suite offers a highly confi gurable, fl exible and fully integrated, browser based, comprehensive front to back solution that complies with message standardization and settlement harmonization. Deployed as a single application or integrated as 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.

peterevansNew Broad Street House35 New Broad StreetLondon EC2M 1NHT: +44 (0) 29 20 402200E: info@peterevans.comW: www.peterevans.com

Princeton Financial Systems (PFS), a 100% subsidiary of State Street Corporation, is a leading provider of portfolio management and accounting systems, investment compliance, data management, and reporting solutions to the global investment industry. Our solutions are used worldwide by over 430 leading investment managers, custodians, insurance companies, pension funds, hedge funds, and banks, which manage combined total assets of over $5 trillion in more than 40 countries.These include ABP, AEGON, AIG, Allianz Global Investors, BNP Paribas, CaIPERS, CACEIS Investor Services, Citi, Commerzbank, Credit Suisse, HSBC Insurance, Metropolitan Life Insurance, Nationwide, Northwestern Mutual, Prudential, RBS, Société Générale Securities Services, and State Street. MIG21, PFS’s award-winning investment compliance and risk monitoring solution, optimizes pre-trade and post-trade compliance checking, the administration of regulatory, prospectus, and internal investment guidelines along with the consequent resolution workfl ows. PFS, headquartered in Princeton (NJ), has offi ces located throughout the United States, Canada, Australia, Singapore, and China as well as in United Kingdom, the Netherlands, Luxembourg, France, Germany, and Switzerland.

Pirum provides a full suite of automated reconciliation and straight through processing (STP) services supporting Operations within the global securities fi nance industry. The company’s on-line SBLREX service encompasses daily contract compare, monthly billing comparison, mark-to-market & exposure processing, pending trade comparison, income claims processing and custody reconciliation. Subscribers to Pirum’s services signifi cantly increase their operational effi ciency and reduce their risk by using Pirum’s solutions, as staff are able to focus on fi xing the exceptions instead of using their time to check and process routine business. These automated processes are more scalable and risk controlled too, allowing signifi cantly higher volumes to be managed without corresponding increases in operations headcount.

T: +44 20 7220 0961F: +44 20 7220 0977C: Rupert PerryE: rupert.perry@pirum.comA: Pirum Systems Limited37-39 Lime StreetLondon, EC3M 7AYW: www.pirum.com

For more information, visit Princeton Financial’s website at www.pfs.com or www.pfs.aquin.com.T: +1 609-987-2400F: +1 609-987-9320C: Lorne Whitmore, Vice President, Global Sales & Product ManagementE: lwhitmore@pfs.com A: 600 College Road East, Princeton, NJ 08540, USAW: www.pfs.com, www.pfs.aquin.com

Directory ISJ42.indd 48 20/08/2009 10:14

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