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June 2009

Turkey - Securities Services Volume 6 No. 40

GBP 25 - UK, ROW
New Model Banking - part 3 USD 45 - America
Trust Culture EUR 35 - EMEA
Panel - Hedge fund administration


In good hands?
Where institutional investors must take the initiative
Market changes - Clearing and Settlement
Middle and back office - Asset Managers

Front Cover ISJ40.indd 1 09/06/2009 16:08

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Front Cover ISJ40.indd 2 09/06/2009 16:08

ISJ Investor Services Journal Heads up

P.08 Profile P.13 Technology P.15 Panel Debate P.22 Analyse This

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

Going for broker: investment managers’ reasons for

P.06 News selecting UK dealers SOURCE: Celent
Our monthly Execution Quality The graph shows the per-
selection of the key centages that investment
Liquidity managers gave a ‘very
stories, reports and
announcements from Expertise in specific markets important’ priority when
Availability of in-house research asked to give the decision
ISJ.tv criteria for selecting UK
Access to multiple markets broker dealers. All decided
Editor: Access to CSAs that the quality of execu-
Ben Roberts Commission rates tion was vital; commission
ben.roberts@2i.tv rates appeared to be
Editor’s letter Access to third party research negotiable in comparison.
Contributing editor: 0% 20% 40% 60% 80% 100%
Anthony Harrington
Post trade post haste
Account manager: such as UCITS and funds leapfrogged by the credit
Tarik Rekiouak
tarik.rekiouak@2i.tv Halfway through 2009, of funds and compliance default swap market on this
Senior account manager:
what stage are we at? Global tools such as electronic client score, when nine institutions
Patricia De La Grange stockmarkets have been reporting - will define create signed up for a CCP initative
simmering comfortably similarities. You are what for this market back in
Business development managers:
James Olweny
throughout May, and remain you eat, or in this case, you February. It has been a
james.olweny@2i.tv a pleasing sight against the are what you have at your busy few months for LCH.
Mark Needham nadir of March. fingertips. Clearnet, as this news follows
A weak dollar has rallied In light of the EuroCCP/ close to the annoucement of
Website developer:
Peter Ainsworth
commodities and firmly Omgeo initiative, ISJ sought its plans to clear interest rate
peter.ainsworth@2i.tv brought the pound back detailed market intelligence swaps.
Operations manager: from the brink of terminal as to the current state of In this issue, Dario
Sue Whittle
decline. clearing and settlement Cintioli at StatPro defends
For trading, the joint in the context of trading the use of CDS – as well as
Commercial director:
Jon Hewson venture of EuroCCP and innovations and market derivatives - and their role
Omgeo to create a clearing shocks in risk metrics in an article
CEO: Mark Latham
platform for hedge funds and The kind of trading on new technology trends in
asset managers has brought markets this magazine covers asset management.
2i Media
UK these groups firmly into has a more significant event Derivatives have had a
16-17 Little Portland Street,
London W1W 8BP, UK
the mainstream financial to look forward to: the first vital use for traders and
T: +44 (0) 20 7299 7700 initiative to eliminate phase of the first central fund managers to tentatively
F: +44 (0) 20 7636 6044
counterparty risk. counterparty in securities gain exposure to emerging
410 Park Avenue, 15th Floor The move is the latest lending, spearheaded by markets. This had been the
New York, NY 10022
T: +1 212 231 8421
contribution that investor SecFinex with LCH.Clearnet case for foreign institutions
F: +1 212 231 8121 services has made in as the clearing house, for entering the highly liquid
© 2009 2i Media plc the dissolution between the Euronext markets. A Turkish market, though
All rights reserved. No part of this
publication may be reproduced,
alternative and mainstream few years and thousands recent swift developments
in whole or in part, without prior investment. This makes of industry articles later, in that country have caused
written permission from
the publishers. sense: what investors the structure is close to more investors - spoilt for
commonly use - from operational reality, and ISJ is choice in a competitive
ISSN 1744-151X.
Printed in the UK infrastructure projects such coming round to the idea. custody market - to look for
as a clearing house, trading The securities lending longer term returns. n
exchange, to funds structures industry has already been Ben Roberts, Editor

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Contents ISJ Investor Services Journal
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

Are you listed? ISJ’s directory
In this issue Clearing of services, starting page 24
15 Clearing the way for
COVER STORY 04 Letters to the editor MTF settlement -
Clearing - Claire Delnoy of
06 News and mandates Euroclear analyses the challenge
The last month of updates in and the options available for
custody, clearing and settlement, post trade in the new trading
securities lending, legal and platforms
compliance and technology.
Fund Administration

17 ISJ Panel Debate

New Model Banking
- Hedge Fund
07 Cover - The trust issue Administration ISJ asks
Our series on New Model Banking industry experts about the
continues with a discussion on critical role of administration for Growing market - Turkey,
the implications for a decline in hedge funds. page 10
trust in the financial world.
22 Analyse This - Clearing
and Settlement -
Guest columnists tackle the
People changing clearing landscape from
08 Profile - David Aldrich, their respective market positions.
BNY Mellon
With extensive experience in 24 Directory of services
both alternative products and ISJ’s exclusive monthly listing
servicing alternative clients, Mr
of key service providers to the
Aldrich divulges his market views
The trust issue global asset services industry.
to Ben Roberts.
New Model Banking, page 7


10 The global appeal of Analyse This - Marco Strimer,

page 22
Turkey - Custody
Ben Roberts analyses the
securities services in one of the
world’s most promising emerging
MEMBER - periodical
publishers association Technology

13 Technology innovation
www.abc.org.uk - Latest tools - Anthony
Harrington picks up on the
TO RENEW YOUR SUBSCRIPTION latest needs and trends for asset
+44 (0)20 7299 7700

Panel Debate, page 17

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Letters ISJ Investor Services Journal
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

including outsourcing to
Dear ISJ reduce operational costs and Dear ISJ “OTC
integrated suites of services.
Within the traditional asset Many now critical functions While the financial system derivatives
management industry, like risk and compliance run works to curb credit
Software as a Service (SaaS) off the same portfolio data, so derivative risks, eyes are still processing can
is well established. Recent it makes sense to outsource external. Internal challenges
market events have seen these functions to a provider are crying out for attention. still paralyse
a move from deployed who can deliver an integrated, OTC derivatives processing
solutions to hosting, or can still paralyse middle and middle and
SaaS, even among larger
institutions. SaaS offers
“Regulators back offices and it’s time this
issue was openly addressed. back offices
the opportunity to reduce and investors There has been a
and it’s time
operational costs: not only distinct shift in focus from
staff costs but also the ability are demanding bottlenecks and efficiency
this issue
to leverage vendor economies towards a different
of scale for items like the levels of operational challenge; that
was openly
hardware, resiliency and DR of counterparty risk and
requirements whilst taking operational exposure management and
advantage of increasingly underlying principles of
robust SaaS technology and robustness operational control. trade event management
proven expertise in this area As many buy-side firms that extends into contract
from vendors. Meanwhile, traditionally have focussed on solving the maintenance activities

associated with
asset managers can initial issues of confirmation of increases, amends,
concentrate on running their processing, whether terminations and novations.
business, leaving vendors to
use their skills and knowledge institutional automated or manually
processed, only a few have
Only by extending
automation and removing the
to support clients’ businesses.
Hedge funds are under managers” gone beyond that to manage
the lifecycle of the contract.
manual processing related to
contract maintenance can an
increasing cost pressures In reality many operational operation truly be controlled
owing to lower fees and multi-function SaaS. areas are geared towards effectively.
increasing operational In addition, regulators and securities processing where
burdens. They have investors are demanding the transaction can be n Geoff Harries,
traditionally benefited the levels of operational captured, confirmed and Vice President
from ‘free’ services from robustness traditionally settled same day or T+3. This Product Strategy,
their providers like prime associated with institutional does not translate easily into Fiserv
brokers, such as risk analytics. managers. Vendors are the world of OTC derivatives
However, the move to helping to meet this need by - systems need to adapt
multi-prime, prompted by providing hosted versions of to support the extended Turn to page 13 for ISJ’s
fears over counterparty risk, their platforms. operational governance report on the risk and
has rendered this model far beyond the initial contract. technology and latest trading
less viable. w n MIke Medley, director, Effective operational and asset management
Hedge funds are thus operations and service, control requires post- innovations
demanding more from Linedata Services
their software vendors Northern Europe To express your views, write to ben@2ipartners.com or blog at www.ISJ.tv

1-23 ISJ40 Final MLa.indd 4 09/06/2009 13:24 Caceis

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09/06/2009 13:24
News ISJ Investor Services Journal
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Custody functionality, known as Omgeo services company, launched

Securities Lending
ALERT New Markets and Misys Credit Risk Vantage, the
CIG Trustees Limited (CIGT) Validations provides expanded latest credit risk offering from
appointed State Street to provide instrument coverage and The traded value and volume the portfolio of Risk solutions
custody services for its asset compatibility with over 150 of Singapore Exchange-listed offered from Misys.The solution
portfolio. depositories around the globe. Exchange Traded Funds (ETF) was initially developed as a new
set new monthly records for two component for Misys Risk Vision
CIGT is an indirect associate of Brown Brothers Harriman went consecutive months in April and to provide additional key credit
China Insurance (Holdings) live with its central settlement May 2009. risk modeling functionality
Company Limited (CIHC). of credit default swap payments to that already offered from
for its clients. The system is Total trading value of SGX- Misys Risk Vision. Misys Credit
State Street will provide designed to reduce settlement listed ETFs was SD836.2 million Risk Vantage brings financial
custody services for CIGT from risk for asset managers by for the month of May 2009. institutions an additional
its operations centre in Hong replacing manually processed This exceeds the previous straightforward model to reduce
Kong, including safekeeping of bi-lateral payments with record of SD533.2 million parameter uncertainty within
assets, settlements, corporate automated netted cash flows per traded in the month of April their business.
actions, income collection and account, per currency. 2009 by 57%.
tax reclaims. Aleri Inc. launched a the “Risk
TMK (Pipe Metallurgical Regulators in Greece and Survival Guide.” including
Meanwhile, the custodian also Company OJSC) has been added Australia relaxed their ban on reports by top analysts, a video
snapped up the custody mandate to those serviced through the short selling of financial stocks, and webinars.
for the global pension scheme of Speedy Settlement Scheme though the ASIC warned that it
mining giant Rio Tinto. (SSS) jointly developed by the might reverse its ruling should The European Commission
National Depository Center markets deteriorate. gave its European Systemic
Clearing (NDC) - Russia’s only settlement Risk Council (ESRC) and
depository - and ING Wholesale Technology European System of Financial
Euro CCP, the European arm of Banking. It is the 37th issuers Supervisors (ESFS) a mandate
US clearing corporation DTCC, to be serviced through SSS, Fiserv’s Investment Services to establish a central European
and Omgeo launched a clearing which aims to reduce the time released the latest version database containing “all
mechanism for asset managers needed for the delivery of shares of its multi-asset, post-trade relevant micro-prudential
and hedge funds. The move and to optimize settlements processing solution, TradeFlow™ information emanating from
underlines the drive for these between NDC and ING Wholesale Release 2.4. The release expands national supervisors” as part of
investment groups to obtain Banking clients. The Scheme has upon the range of activities that its plans for a new regulatory
protection from counterparty functioned successfully since can be handled by TradeFlow architecture. The plan was
risk to the same degree as their November 2007. for the post-trade event criticised by technology and
banking peers. management support of OTC regulation think-tank JWG-IT.
KAS Bank added the alternative Credit Derivatives. TradeFlow
Meanwhile, Omgeo enhanced trading platform Equiduct to will enable clients to manage all The International Monetary
Omgeo ALERT, the industry’s its European network of direct aspects of the post-trade event Fund (IMF) has Platform
largest Web-based global exchange links. The Dutch management lifecycle, including Symphony for high-performance
database for the maintenance bank will provide clearing & trade confirmation, post-trade grid computing to handle the
and communication of standing settlement services to its clients event management and payment increase in economic modelling
settlement and account as a General Clearing Member of processing. and risk analysis, along with
instructions (SSI). The new LCH.Clearnet. Misys, application software and boosting efficiency. n

Latest mandates

Month Winner Client Location Assignment Mandate size

June State Street CIG Trustees Ltd Boston Custody n/a

June State Street Rio Tinto Boston Custody USD8 billion

May JP Morgan Flagstone Re New York Global custody USD1.3 billion

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ISJ Investor Services Journal New Model Banking - Trust

Part three of New Model

Banking - investor trust The trust issue
Financial institutions don’t Certainly risk management is
plough huge amounts of money into climbing the agenda for more cautious
their relationship management for investors and this, along with corporate
nothing. Keeping clients through governance, are the two central concerns
strong relationship is an issue that has that are integral to client reporting,
magnified by the financial crisis. The according to Griffin.
‘credit crunch’ itself saw interbank trust “We may find asset managers and
at an all time low. asset servicers collaborating more on
Though the failure and middle office services such as risk and
nationalisation of banks may have performance analytics.”
ceased, the reputation of banking will Institutional investors, particularly in
take years to mend. the UK, have traditionally relied on the
Trust, it would seem, is one of the reporting is increasing. intermediation of consultants.
most precious commodities, and the Investors will demand insight into “The due diligence conducted
reassurances given by financial firms practices and processes that two years by consultants is focusing on risk
through presentations, advertising and ago they would not have concerned management and corporate governance
events as to their stability and sobriety of themselves with. Nicholas Griffin, now more than ever before.
operation is, in contrast, probably at an Partner and European Head of KPMG’s “Advisers and consultants are
all time high. Asset Servicing Practice points out that strengthening their due diligence
The absence of trust is perceived as the middle to back office will not only capabilities around risk management
a bad thing for all concerned - from the become more important to investors, but assessment.”
pension fund that selects its custodian will need to become more integrated. Griffin adds that many asset
and asset managers to the regulators “What we’ll see is greater managers are seeking to strengthen
attempting to re-evaluate legislation, seamlessness of core business processes their relationships with consultants and
to jurisdictions that promote that flow through investment managers demonstrate not only their investment
themselves as beneficial places to do and into administrators and custodians. products and strategies but also their
business. Whereas historically there might be risk management systems and processes
The key to trust is to allow someone three different organisations with in the knowledge that these have become
else to be your eyes and ears. Volatile different approaches and processes more important and that consultants
markets, corporate write-downs and, – in future, regulators will look for play a critical role in the selection
above all, investor losses all put strain these organisations to be more joined process.
on the confidence of that investor. In the up. In addition, investors will drive If this is the case, it puts the trust
US, this has led to a flurry of lawsuits, investment managers to be more joined issue in an unusual light. Institutional
particularly in the securities lending up. Stronger and more transparent investors rely on consultants, particularly
business where losses incurred in cash end-to-end risk management processes in the UK, to understand and assess the
collateral reinvestment has pitched and procedures have become a more risk models of banks that seek to manage
beneficial owner against agent lender. important selection criteria. the investor’s money. Yet if, on occasion,
But the kind of changes in the “Part of the renewed promise the banks get close to consultants, to
market that this magazine covers and restoring trust is bringing the the apparent benefit to the consultant’s
- the rise in independent fund constituent parts of the value chain knowledge, what does this say for the
administration, for example - put the closer together.” consultants’ objectivity? Would the
issue of trust in an interesting light. But if institutional investors take a investors’ trust issue be not just with the
When trust declines, investors will greater and more thorough role, asking banks, but with the middlemen?
no longer be satisfied with what they for increased oversight, one could Official initiatives to change
are told. As last month’s interview question if the decline in trust such a legislation and generate investor
with T. Andrew Smith demonstrated, bad thing. If trust levels stay low, and confidence can on occasion, overshoot.
institutions will demand to understand the levels of bank scrutiny remains Last month, this took the form of
more of their asset manager’s high, it would appear a more promising the draft legislation from the EU that
operations, along with a breakdown in dynamic to change the industry and help cracked down on hedge funds – an
performance. The importance of client prevent another financial crisis. industry almost as suspect in the wider

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New Model Banking ISJ Investor Services Journal
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

world as banks - in Europe. The paper

proposed leverage limits, which would
be debilitating for start up funds, and
Madoff had existed for a few years.
Investors, which included retail clients as
well a variety of corporate funds, trusted
would restrict US managers from raising one man with billions – probably
and managing assets on the continent. enthused by the reported year-on-year
Further, managers must be established in investment returns.
a EU member state and must apply for a Banco Santander, the Spanish bank David
passport to distribute funds.
Opposition to the draft, which
whose star had risen in the financial
crisis for its steadiness and acquisition
could be enacted as near as 2011, ability, has been the biggest loser from BNY
was resounding, from the Alternative Madoff, both monetarily and in terms
Investment Management Association to of trust. Last month the bank paid Mellon
the Hedge Funds Standards Board. An USD235 million to the Irving Picard, the Dorchester-born David Aldrich
AIMA statement said the hastily created court-appointed trustee charged with may well have the broadest responsibility
directive was made public “without obtaining compensation for Madoff ’s in asset servicing. He has what he calls
anything like the usual standards of victims, to avoid a lawsuit to recoup two “hats” at BNY Mellon - head of the
consultation we expect.” Does this profits made the Spanish bank. Global Client Management division
suggest that the industry bodies trusted The trustee has also accused some for financial institutions in Europe,
the EU that they would be consulted – investors of failing to use sufficient due and business manager for alternative
can it ‘expect’ that much? diligence on Madoff. Indeed, that the investment and broker dealer services in
Hedge funds remain one of the few bank endorsed Madoff shortly before his Europe.
groups who do not count their chickens scam was uncovered at the end of last The first of these is what he calls
by relying on trust. Certainly they must year was the most stinging indictment of “delivering the whole bank” to brokers,
demonstrate to their investors – as we a bank’s reputation. investment banks, some commercial
have seen, investors are asking more So where does that leave the issue of banks and alternative investment funds.
questions - that they are both solvent trust in the future of banking? There As a relationship role it is an overall
and have a clear investment strategy. has been a lot of talk over the last year monitor to ensure the client gets what
But as one senior figure in a major that, post-crisis, the financial world they need. “If you look at the client
custodian told ISJ: “Nobody I know will never be the same again. Yet after holistically, [you’re asking:] ‘what issues
in the hedge fund market is scared of nearly two years the understandable, they are facing’? If you look at the
regulation. That’s not the same as saying overriding desire for all is a return to alternative funds sector last year they
they are pushing for greater regulation. normality. With global stockmarkets had real issues around counterparty risk,
But managers don’t have anything to fear gently lifting over the last month it is and infrastructure collapse. We can help
– in the UK, all managers are regulated; clear that ‘normality’ will arrive quicker with both of those concerns.”
that’s different to the US: in the UK it’s than a change in the overall framework The breadth of custody services
compulsory and the hedge funds in of relationships, responsibility and means that the bank can “step into
the UK have not been the cause of the accountability, which are systemic and the breach” and provide the necessary
financial crisis or major instigators of cultural in their nature. solutions. He adds that the bank never
fraud or accounting scandals.” Institutional investors – particularly predicts what it is going to offer to a
On this subject of, fraud and beneficial owners of pension funds – particular client. “We’re a broad based
accounting scandals, the senior figure must in the meantime do what they can securities services firm, we generally
then moved logically on to this year’s to change ‘normality’. have a capability that we can deliver to
most infamous fund manager, whose These players must continue a part segment; it doesn’t necessarily
demise adds another angle to the trust the demand for independent involve reinventing the wheel,” he says.
issue. “No-one asked Bernard Madoff administration, segregated accounting, The second role involves delivering
who his service providers were. You need detailed reporting. Their involvement in services to alternative fund managers,
to know: who is the fund manager, who financing areas such as securities lending including private equity, hedge and
is the service provider? If you get the programs must continue to increase, funds of hedge funds. There are a range
right answer you’re a long way to getting and they must ultimately become the of service that make up the P&L
a good structure. And if it’s a Cayman clear authority, reducing the historical – fund administration, custody, cash
fund – it’s not a red flag, you have to do reliance on consultants. The issue of management, foreign exchange - as well
checks but it doesn’t mean it’s a problem their trust must ultimately return to as some back offices services.
de facto.” their abilities to best demonstrate how It is the alternative investment clients
Suspicions surrounding Bernard they should be serviced. n that cross over these two roles. And the

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ISJ Investor Services Journal Profile

bank has been proactive in analysing leave surplus capital with a prime the innovation ten years ago, he says
the market and seeking the key areas broker, they maybe reluctant to do so BNYConvergeEx is taking full advantage
to provide service. Most recently this given the hard evidence of the last year as a service from today’s fragmented
fact-finding cam in the form of a white that brokerages can fail. market for trading liquidity, enhanced
paper produced with Casey Quirk, the “[Hedge funds] need the prime by the proliferation of new multi-
management consultant, called “The brokers, but margining to the penny is lateral trading facilities. The system
hedge fund of tomorrow: building an a difficult job. There’s always going to allows users to tap into various pools of
enduring firm”. “What we found is that be a surplus, and if you’ve got 40 funds liquidity, no matter how disparate the
investors who took money out of hedge and they’ve all got an extra 100 million spread. “If you have clever technology
funds and reallocated into cash were on with a prime broker, that’s four billion like that, it doesn’t matter about about
the whole high net worth individuals total. So the exposure in aggregate can fragmentation because you have a
who were invested through large be substantial.” mechanism that can aggregate it,”he
private banks. Individuals who weren’t The tri-party agent, again, can sit in explains.
expecting to lose money in hedge funds the middle to collateralise the position. But are we to see consolidation in the
got a nasty shock when the industry David Aldrich spent much of his early trading space any time soon? “Logically,
went into freefall, and they said: just get life in Wincanton, and after graduating one can assume these things will be
my money out,” says Aldrich. in Economics at Kent University brought together. But the advantage of
He adds that the overarching trend joined Phillips & Drew, shortly before the fragmentation is whoever is quickest
found in the survey is that investors was bought by UBS in 1986 amid a and most efficient will win, and the
have not lost their faith in hedge funds wave of deals made between London market will win.
to deliver absolute returns and give stockbrokers and foreign investment. “I think there is no hiding place
investors protection in tough times. His first role was in relative bond sales, in today’s market; the markets are
“A lot of the institutional investors are which, he says, “morphed” into the becoming more transparent, more
going to increase their allocations and futures and options business. efficient.”
that was most aggressively made clear These ETDs, including index and A more pressing and topical concern,
in the US. Pension funds are increasing fixed income futures, were trading given the make-up of his clients, is the
their weight in Europe too, but at not as in tiny amounts in the mid 1980s proposed increase in regulations on
fast a rate.” compared with today, he says, but they hedge funds. At the time of interview
Amid the credit freeze of the last were on the cusp of a boom. the EU’s draft legislation for alternative
two years the issue of counterparty With growth comes standardisation, funds – which may have a significant
risk became ubiquitous. BNY Mellon, and in 1998 he left UBS as director of impact on a US fund’s ability to
along with Wall Street rivals JP Morgan, listed derivates sales in Europe and distribute funds in Europe – had stocked
in particular, became the leading moved to Credit Suisse First Boston a significant backlash from related
exponent of the tri-party collateral (CSFB) to help launch the “PrimeTrade” investors.
management system, a service that futures trading platform, and to work Aldrich believes hedge funds have
seeks to reduce some of the exposure with the team on the creation of the nothing to fear from legislation, and
for trading partners. “PrimeClear” futures clearing system. points out that many UK managers in
For securities lending and repo PRIMETrade was designed to allow in particular are regulated. The bigger
deals, the custodian sits in the middle traders to directly execute futures onto players, too, he adds, have been very
between two trading parties, holding the exchanges without them having to be active in adopting any best practice
the collateral received from one side to exchange members. guidelines. “There’s been an enormous
neutralise the exposure for the other “The development was: here’s a single swing over the last few years towards
party. platform on which you can trade in all best practice and embracing better
“If I’m lending securities against the derivatives exchanges and you can transparency – and the journey is not
securities, I don’t want to have to touch also see your position and settlements.” over.
it,” he says, from the point of view of an He then moved to JP Morgan “We’re looking at hedge funds using
agent lender. “I don’t want to manage Chase to become head of relationship our broker dealer products and broker
your equities, it’s cumbersome, so why management and sales for its clearance dealers servicing our hedge fuds. It’s
don’t I use the BNY Mellon to do that and collateral management products a lot of cross selling and utilisation of
for me?” in Europe. In 2003 he became head of products in new innovative ways and
He adds that it allows the prudent securities industry banking in London serving a higher proportion of the more
agent lender to easily maintain for Bank of New York, responsible for successful managers.” n
standards with its collateral profile. relationship management and sales David Aldrich is head of global client man-
The tri-party system has an additional for the hedge fund and broker dealer agement for financial institutions, Europe
benefit for hedge funds, he adds. industries in Europe. and business manager of alternative invest-
Where before a hedge fund might Just as internet-based trading was ment and broker dealer services in Europe

1-23 ISJ40 Final MLa.indd 9 09/06/2009 13:24

Custody ISJ Investor Services Journal
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The global
of Turkey
Turkey has been a resilient success amid the financial crisis, and its
status as an ‘emerging’ market is receding, finds Ben Roberts
When the administration of US official help from the IMF is “unlikely”. a liquidation. “The foreign investors
president Obama selected Turkey as “Turkey will need an IMF program to fill still hold a significant share of the
the first country with a Muslim majority its external financing. Our calculations publically-traded equities,” he says.
in which to speak, it can be regarded show it will need about USD12 billion “This is seen as a strong and positive
as a conservative and symbolic move. for 2009, and possibly another USD10 sign and been contributed to the
The country stands with its two feet in billion for 2010. Beyond that, it is significant increase [on the ISE] of 30%
the west and east in innumerable ways, anyone’s guess.” since start of 2009.”
a bridge for the president to articulate He adds that the issue of external He adds that Turkey did not suffer
how the two worlds can meet. financing is dependent on the ability of the liquidity problems that faced a
Turkey’s financial markets and the private sector to roll over its debt. number of markets, emerged and
related financial services have made Another factor is that Turkey’s current emerging, and that this sent out a
significant strides in crossing that account deficit is heavily impacted by strong message internationally. “The
bridge in the last ten years. Despite the oil prices. “Turkey is an importer, last stock market was open every day, it
infrastructure problems at the beginning year’s current account deficit was about never stopped trading and I think it
of the decade, the remarkable resilience 5.6%. So if the oil price comes down to was a strong sign that it’s always open
of its stock exchange, the initiatives USD55 per barrel for the rest of year this for trading and you’ll never get stuck
shown to develop a EU economy in number will be down to 1.5% of GDP, with your assets.”
all but name, and the growing list of so there are some factors that help the This confidence boost is a far
foreign securities services institutions current account.” cry from the situation custodian
seeing opportunities, gives a strong It has been affected, as with all banks found in 2002 and 2003. Then,
demonstration of purpose. emerging markets, by the financial proposed changes in tax regulation
But its potential is still in some ways crisis, though one of the country’s chief caused a misunderstanding in the
hampered by undecided issues. Its selling points is the relative size of the nominee structure for custody in W
protracted negotiation for a loan with loss and the continued international the country. It meant custodians
the IMF, for example, is significant, as popularity. The ownership of local were responsible for their clients tax
is a related issue that has challenged securities by foreign investors can implications, which some say spooked w
economists: whether the country can be partly used as a barometer for its a lot of custodians. f
meaningfully decouple from local, international popularity, according That potential for misunderstanding d
more vulnerable rivals. to Gunsel Topbas, securities country has since been removed as Turkish
Selim Cakir, chief economist for manager at Citi Turkey. He points out regulation now dictates that all investors
Turkey at TEB Securities Services, a
long standing local bank that has an
although the percentage of foreign
ownership of local equities declined
have their own tax identification and
that these investors have segregated
international partnership with BNP
Paribas, says the chance that Turkey
from 72% two years ago to around
65% today, the general acceptance is
accounts to reflect this distinction.
Topbas says Citi, which acts as sub-
can finance its balance sheet without this decrease should not be seen as custodian, as per market regulations, B

1-23 ISJ40 Final MLa.indd 10 09/06/2009 13:24 Gsl_BB


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1-23 ISJ40 Final MLa.indd

Gsl_BBQ_Ad_ISJ.indd 1 11 09/06/2009
08/05/2009 13:24
Custody ISJ Investor Services Journal
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works with its global custodian clients since the introduction of the Turkish funds invested overseas.
to establish segregated accounts for the Derivatives Exchange (TurkDEX). The “We’re keeping a close eye on the
investors. exchange is eager to grow, and is now pension funds because eventually as the
He adds that segregated accounting in the process of simplifying the ability pension funds market grows the custody
is best viewed as a set of layers. “At the for US based funds to be listed. Single services grows in that area,” says Gurson
highest level as a local custodian we stock futures and options are also in the at TEB. This seems to be the thinking of
have an accounted infrastructure at pipeline. Deutsche Bank, who in 2005 established
the Central Registration Agency, then Ramy Bourgi, head of emerging a sub-custody business in Istanbul
this institution requires investor-level markets development at Societe and in 2007 acquired the cross-border
accounts opened separately in their Generale Securities Services, says the custody business of Garanti Bank.
books, which would reflect the accounts inflow of investment has quickened the Cakir at TEB says he is bullish about
that are open in our books. So the need to create internationally recognised Turkey’s prospects in the long term,
regulation requires the investor-basis standards and infrastructure. “A UK though the current circumstances in the
registration of assets in the name of fund manager distributing funds in an global markets means he cannot say the
the account owners, and also the tax emerging market needs comfort that same for the short term. “We are seeing
regulation requires a separate tax ID.” global deleveraging, an increase on home
The central securities depositary system
remains unconventional, with Takasbank
“Since 2003 the bias of capital, and substantial increase
in the borrowing of advanced countries
acting as the central custodian and the growth from the that limits the emerging countries access
Central Registry Agency – established at to foreign financing.”
the beginning of this decade - handling client segment has However, he adds the traditionally
the clearing and settlement. high inflation means that the country’s
Turkey has attracted US and increased a lot” banks do not hold a significant amount
European-based institutional investment
for a number of years, but recently the Ertunc Gurson, TEB of mortgage loans, avoiding both a
bubble in housing prices and exposure
country’s appeal has expanded to Latin
American pension funds, sovereign
Securities Services to the contagion of toxic assets.
Beyond this, Topbas says there
wealth funds as well as further inflows is a strong drive from the regulator
from Asia. Ertunc Gurson at TEB the fund managers and their clients are and the Capital Markets Board to
Securities Services cites the stability of protected in the same way. So the flow establish Istanbul as an international
the one-party political system and fall in of money into the market is forcing that finance centre.
interest rates and inflation as key reasons change.” “There are certain working groups
for this expansion of appeal. Indeed, on The local pension fund industry is and committees established by different
16th April of this year Turkey’s central only a few years old. Government and parts of the government and market
bank - Türkiye Cumhuriyet Merkez private-company employees both have regulators,” he says. “Establishing
Bankası - cut its benchmark interest a state issued pension automatically, Istanbul as an international financial
rate by 75 basis points to 9.75% 25bps though an additional private scheme is centre requires the further development
beyond most analysts’ expectations. still voluntary. The lag in the pension of the market towards best practices
The Turkish lira fell 0.5% against the fund industry is partly down to the and listening to more to the foreign
US dollar and 0.2% against the euro. government initiative in the 1990s to investors, to their expectations ; and this
The central bank has an inflation target retire its population at the age of 40. is what the market authorities are willing
of 7.5%, thought the Bank’s governor, That has now increased by 20 years – to do, right now ”
Durmus Yilmaz, recently estimate that another alignment with the western He adds that the market itself has a
inflation may drop below this target. norm – and the country’s young “strong willingness” to turn
Gurson also points out that when population gives strong potential its candidacy to be part of the European
international investors enter the market, for a new and longer-term generation Union into a fully fledged membership.
it is for a longer period – further of savers. “I believe the shorter term agenda is to
enhancing the country’s stability. The combination of a nascent clearly understand the EU regulation
“Historically Turkey always attracted pension funds market and a limited and to the extent to adapt those
more clients looking for a quick return, demand from local players to invest regulations into the Turkish market to
but since 2003 the growth from the overseas means that global custody is not the best possible extent. There’s a no
clients segment has increased a lot.” established as a service. However, this resistance or hesitance in the financial
Cautious investors seeking exposure can change quickly, and Ramy Bourgi market - to the contrary, there is a
to the market through derivatives can at SGSS points out that in the 1980s, growing interest.” n
also be well served. It is now four years only around 5% of a typical US pension


1-23 ISJ40 Final MLa.indd 12 09/06/2009 13:24

ISJ Investor Services Journal Risk & Technology

Tomorrow’s innovations complexity, simple derivatives actually

Anthony Harrington identifies the future for worked extremely well through the crash.
Credit default swaps – the additional
fund managers’ middle and back offices. insurance deals taken out on the back of
money lending – have been particularly
Cost reductions and enhanced risk expertise at managing the details of prominent and are now an established
management have become ubiquitous derivatives pricing and this has created a market, with recent efforts from the US
in discussions surrounding software and real position for it in the market. “We take regulators to establish a central clearing
systems for the middle and back offices of on the outsourcing of pricing activities house.
fund management firms. Anything that for our clients, which takes the pain of “Credit default swaps were actually
speaks to these areas will find a budget, managing all this complexity away for more liquid than bonds through the crisis,”
even in these tough times. them,” he says. says Cintioli. “They provided pricing at a
Nevertheless, it is surprising how Accurate data services are the basis for time when value was hard to determine by
many areas of IT can be dusted down and successful derivatives pricing. The volume conventional means and they were and are
reshaped to bring risk management to of feeds on a really complex derivative excellent.”
the fore. Even where risk is not central, can make this a significant challenge, Statpro uses the CDS market as a
or even a decent peripheral add on to post-trade. “There is a natural and gauge of credit risk in its models, rather
an application, there is always the cost than ratings agencies. “If you want to
reduction issue. “Risk management lock in credit valuation, you can do it
Risk management is anchored in the
level of detail that investors have about the is anchored in the very well with a CDS. Since it is a traded
product you know that the value is going
markets, counterparties and products in
which they trade.
level of detail that to be sensible,” he says. Statpro captures
derivatives information, including CDSs,
On the product side, Dario Cintioli,
Global Head of Risk Management and
investors have from all the various sources, including the
investment banks and dealer brokers and
Complex Pricing at Statpro, says that there about the markets, it has swap agreements with discounted
is now tremendous interest in systems parties to get access to the data.
to help manage all aspects of derivatives, counterparties and Transparency with trading products
particularly pricing risk. “The thing has also grown with a demand for
about derivatives is that they span the products in which transparency for trading strategies. With
spectrum of complexity, ranging from the
very simple to the extraordinarily, even they trade.“ investors seeking clarity as to how an asset
manager operates, client reporting has
scarily complex,” he says. He reveals that understandable antipathy to derivatives grown in significance.
in one recent discussion with a client, the today, which is not surprising given the Harry Thompson, Chief Technical
description of the payout on a derivative damage that has been done. However, Officer and co-founder of Kurtosys, which
product alone ran to three closely written derivatives are extremely useful for many provides comprehensive end-to-end
pages of formulae. institutional investors and corporates, so client reporting services, says that n such
“This is part of the reason why there is the appetite for them is not going to go volatile markets, investors are taking much
a lot of confusion in the market,” he says. away,” he comments. more of a “hands-on” view of things and
“The crisis was triggered by products that However, Cintioli points out that are pressuring fund managers for near
were very difficult to understand and it is managing the entire range of risks on even real time reporting. At the same time,
now clear that some products had achieved a simple bond has its challenges. “If you intra-company reporting in investment
an unmanageable degree of complexity,” want risk control done well, even on a management companies has a real urgency
he says. simple project, then you want all the risks about it.
Any pricing provider has to be prepared modelled, including credit risk, interest “From a risk manager’s point of view,
to work through this complexity with rate risk and so on,” he says. So there is still he is pulling our information together
the client in detail. As Cintioli notes, the a non trivial management challenge for with valuations and other data and then
bit you gloss over is likely to be the bit software providers to address, even at the wants to know how we can securely and
that contains the elephant traps. Statpro simple end of the spectrum. consistently – and in a scalable way –
has built up a considerable amount of He adds that despite their perceived deliver that information to his prospects,


1-23 ISJ40 Final MLa.indd 13 09/06/2009 13:24

Technology ISJ Investor Services Journal
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investors and indeed, to third parties such management. It is merely a matter of plays a huge role in this in the US, and
as data aggregators,” he says. the IT manager adjusting his or her in Europe EDI format transactions often
Kurtosys’s sphere of operations is in perspective and goals slightly, and this is offer a way forward. “We normalise data
the back office, reporting on actions and happening fast,” he says. into XML and then “naturalise” it into,
behaviour from the middle and back office It also pays to be a good middle man say, SWIFT for European payments. Our
side. “Most of our reporting is point-in- when it comes to transferring information. Sterling Business Integration Suite can sit
time accounting data, taking positions, Sterling Commerce has carved out a at the edge of a banking enterprise and
looking at valuations and transaction significant market niche in a number of normalise incoming transactions, routing
reporting. This will go together with all the different areas of business from simply them appropriately, and providing a full
commentary and the bits and pieces that transferring messages. audit and reporting trail,” he says. “Agile
a manager would want to get across to his Richard Spong, Industry Marketing integration is now a really big buzz word
customer base,” Thompson says. Manager (financial services) at Sterling in this space – no one knows what the next
Many funds managers are facing the Commerce says: “The great majority of systems integration challenge might be!”
challenge of moving to ad hoc reporting what we do for over 800 banks worldwide, Tom Abrahams, CEO of DST Global
on line, providing clients Internet based is to move their data from place to Solutions, the relaunched face of what
access to secure extranet sites. “This used place, from system to system within the used to be fund accounting specialist DST
to be a real pain for managers who were enterprise, or in the larger world, between International, says the company is more
accustomed to setting up reports for communities, such as banks to customers, focused on moving into the middle office,
clients on a monthly basis. Now they can or between geographically dispersed units rather than the back. He too reckons a
bring all the customers to a web portal of a multi-national.” major area of innovation is in software as
where the customers can do all their own Straight-through processing (STP), or a service. “We are putting a number of our
analysis on line. This is a real growth trend getting as close to this as possible, is still a applications on an ASP basis, including
at present,” he says. key demand in the market. our risk application and our performance
One big new trend is the convergence “What the current crisis has brought management systems,” he says.
of on-line web portal reporting with social into sharp focus is that all the counterparty “We aim to address not just market and
networks. Clearly the more investors can risk and regulation resolves down to data credit risk, but also operational risk and
share information with each other about integration agility. It is not just that you we have applications around risk analytics
their investments, the more they are need to be able to see your whole position; and performance measurement which do
likely to gravitate towards successful fund you also need to be able to remould the exactly this,” he says. DST is working with
managers. This kind of viral reporting is community that you are dealing with in a institutional clients on the client reporting
becoming a critical source of new funds. crisis. You need to be able to speak to their side and on OTC derivatives processing.
Thompson points out that one of the systems in a language that their systems “Today everyone wants to talk about
strongest selling points is that Kurtosys’s understand.” risk and performance measurement and
customers are buying a service, not a This is particularly pertinent in mergers one of our great challenges as a company
product. “Everything we do is accessible and acquisitions. As Spong observes, is ensuring we have enough resource to
via a web browser and fits well with the the financial crisis has shortened the address the demand that is out there,”
new concept of cloud computing,” he says. timeframe for mergers considerably. In the he says. According to Abrahams there is
He emphasises that even with software past people would sort out where one bank virtually no appetite in the teeth of this
spending having turned down sharply in was strong and where another was weak, downturn for institutions and banks
the recession, revenues for software-as-a- in systems terms, and then design the to address big, core system migration
service, and for the ASP model have been integrated system to make best use of this.” projects. “Those are long term and very big
climbing. Now, with acquisitions occurring ticket projects and about the only place we
“The dilemma for all IT managers, in days or weeks, or being forced into see these going forward today is in China.
in this sector as elsewhere, is that they existence by political or regulatory “These are very sticky applications
all want to own their own kit, since pressure, the scrutiny on the operation and no one changes them very readily
traditionally that was their job. However, of combined middle and back offices has no matter how good a new system might
cloud computing is going to dominate decreased. look. However, in the middle office space
everyone’s lives and IT managers are “There is now tremendous pressure on we see a huge amount of change going on
increasingly coming to see that if someone banks to find ways of translating systems right now. There is huge interest in systems
else can provide the service, their job so that they can optimise solutions in very that can provide a better service and more
henceforth is about managing vendor short order,” he says. accurate and timely OTC reporting,” he
relationships, rather than hardware The “portability” standard, XML, concludes. n


1-23 ISJ40 Final MLa.indd 14 09/06/2009 13:24

ISJ Investor Services Journal Clearing

Clearing the way for

MTF settlement
Claire Delnoy, systemic risk, and leads to lower market CCP (e.g. EMCF for Chi-X and
settlement costs as the trades netted by EuroCCP for Turquoise). Each of these
director, equities the central counterparty (CCP) result in has advantages and disadvantages.
fewer instructions sent for settlement. Using an established CCP affords
product management The birth of MTFs should increase the the considerable advantage of limiting
at Euroclear analyses proportion of trades that are netted as the settlement impact of a liquidity
they intend to attract business not only shift from a regulated exchange to an
the clearing challenges from the regulated exchanges, but also MTF. All the trades will, in the markets
from the OTC market where trades where it is possible, be netted into a
in a fragmented trad- single settlement instruction by a single
ing market brought CCP, known as ‘cross-exchange netting’.
Also, a clearing member firm (CMF)
about by the MiFID accessing such a CCP can leverage its
existing relationship and technical
directive. interfaces without extra cost. On the flip
It is now more than a year since side, this model does not exert any price
the Markets in Financial Instruments competition among CCPs.
Directive (MiFID) came into effect. Yet, The alternative model, where
after a slow start, it is showing signs of MTFs route instructions to a newly
succeeding in its goal of encouraging created CCP, sets the CCPs in direct
competition between trade-execution competition with each other, resulting
venues and reducing execution costs. in cheaper clearing tariffs. For example,
By removing trading concentration LCH.Clearnet has cut its tariffs four
rules, mandating best execution times over the past two years. But this
and allowing for the creation of model has its drawbacks, at least in the
new trading platforms, MiFID has short term.
established a level playing field For middle and back offices, a new
between the regulated exchanges, new “There are two CCP means managing yet another
multilateral trading facilities (MTFs) CCP relationship, monitoring the
and systematic internalisers. models for MTF effectiveness of the new infrastructure
The MTFs that have been launched
since the implementation of MiFID,
clearing: using the and developing new operational
procedures in line with the levels of
for example, Chi-X, Turquoise and existing CCP and sophistication and automation of the
NASDAQ OMX Europe, have, at the very new CCP. Messaging and reporting
least, exerted downward pressure on using a new, formats also differ from one CCP to
the tariffs from some of the regulated
multi-market CCP” the next, a part of the business that is
not as standardised as in the settlement
Trading costs are only part of the traditionally settle on a gross basis. industry, ie, around ISO 15022
story, a fact that has been recognised There are other aspects to consider. standards.
by those MTFs trying to fulfil MiFID’s In essence, there are two opposing On the positive side, several MTFs
‘best execution’ requirements by also models for MTF clearing (although are using the same new CCPs, so new
setting up cheap clearing and settlement hybrids exist): one is where the MTF relationships and communication
arrangements for their members. uses the existing CCP already serving the procedures can be amortised across
regulated exchange (e.g. the Equiduct multiple markets. In addition, cross-
Clearing challenges model) and a second model is where exchange netting will also be possible
Clearing reduces counterparty and the MTF uses a newly created, multi- between these trading venues.


1-23 ISJ40 Final MLa.indd 15 09/06/2009 13:24

Clearing ISJ Investor Services Journal
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Settlement impact manner’ because each CCP may settle making securities less available when
Initially, there will be no settlement transactions on a different platform in needed.
cost savings derived from the usage the CSD. Again, settlement efficiency There are also potential consequences
of new CCPs. This is because trades may suffer. for brokers, the CMF’s underlying
executed on a regulated exchange and While in the short term, in some clients. At first glance, it might seem
trades in the same security executed markets, the new CCPs may be slightly logical for a broker to have only one
on an MTF using a different CCP disadvantaged vis-à-vis the incumbents, clearing arrangement in place per CCP,
will result in two separate settlement the situation could rapidly change. whether as a ‘self-clearer’ or by using a
instructions - one per CCP - being Most CSDs, including those of the clearing agent. This could mean having
sent to the central securities depository Euroclear group, have been working a mix of clearing arrangements in any
(CSD). Furthermore, the MTF- on developing generic, netting-model one country, which would have an
originated settlement instruction may, agnostic interfaces for multiple CCPs to adverse effect when the broker executes a
in some cases, be disadvantaged versus accommodate data flows to national and client order across several venues that is
the exchange-originated settlement international CSDs. cleared and settled by different agents.
instruction. This is because some There are also a number of settlement
CSDs have separate platforms for the issues to consider when trades in the Resolving post-trade dilemmas
settlement of on-exchange and OTC same security are cleared via several The ideal solution is CCP
transactions, and the initial MTF flows CCPs. At the most basic level, some interoperability whereby a broker/
would typically settle on the OTC CCPs use a power of attorney to send CMF could choose one CCP to use for
platform. settlement instructions on behalf of all markets. The prerequisite for this
The reason for disparate settlement CMFs. Because other CCPs do not to happen, apart from political will, is
platforms is that the on-exchange use this feature, CMFs may have to for several CCPs to get feeds from the
platform needs more facilities to increase send settlement instructions for some same trading venues, and then resolve
settlement efficiency, for example, CCPs and not for others when the same issues relating to cross-CCP netting,
different settlement windows, different security is traded on different execution such as the different netting models,
recycling rules and partial settlement venues. for example, continuous net settlement
possibilities. The consequence, at Moreover, the fact that the different versus trade-date netting.
least in the immediate future, is that CCPs can have different buy-in rules This is starting to happen, with
settlement efficiency will be sub-optimal could have an impact on how CMFs EuroCCP and SIX x-clear, and
for instructions received from the new manage the settlement of trades. CMFs LCH.Clearnet and EMCF, recently
versus incumbent CCPs. want to prioritise certain instructions, announcing interoperability
The incumbents have further so that in cases where there may be agreements.
advantages over their upstart rivals; insufficient securities to deliver, they As a result, clearing firms will be able
certain established CCPs, such as will have the maximum time to source to maintain membership in only one
LCH.Clearnet S.A. for the Euronext them without penalty. Let’s take an CCP and, because trades will be netted
markets, have settlement arrangements example where a CMF is to receive across venues, collateral requirements
in place for clients trading securities 100 securities OTC and deliver them to cover CCP exposures will be reduced.
in currencies that are not eligible for on to three CCPs (in lots of 20, 50 and Until this time, there is a strong
settlement in the local CSD, i.e. French 30), reflecting the three venues where argument in favour of using a global
securities can be traded in US dollars the trades were executed. If only 50 clearer, which means using the same
on Euronext. This is done by settling securities are received on settlement clearing agent for all CCPs, in order to
these trades in an international CSD, date, which CCP(s) will receive the ensure fungible settlement.
ie, Euroclear Bank. However, such 50 securities will depend more on the MiFID offers a bright future for
arrangements have not yet been put in settlement timings and processes in the MTFs by encouraging greater levels of
place by the new MTFs or their new CSD than on anything the CMF can do competition in trade execution to the
CCPs. itself. Thus, managing the prioritisation benefit of end investors. However, the
Clients trading on both MTFs and of settlement instructions may be a long-term viability of MTFs depends
regulated exchanges may face the challenge for CMFs, and some actions on getting the best CCP model in
drawback that their trades, cleared they may take, such as holding back place to offer clients the cheapest and
through different CCPs, may not instructions, may reduce the settlement most efficient clearing and settlement
be able to settle in a ‘back-to-back efficiency of the overall market by opportunities. n


1-23 ISJ40 Final MLa.indd 16 09/06/2009 13:24

ISJ Investor Services Journal Panel Debate

Hedge Fund Administration: Panel

Gavin Gray is the John Alshefski, Head David Aldrich is Andrew Dillon joined Peter O’ Dwyer
managing director of of New Business head of global client Baronsmead Partners is director at
Phoenix Fund Services’ Development for SEI’s management for Ireland as Managing Trinity Fund
offshore operation investment Manager financial institutions, Director in July 2007. He Administration
Services. SEI IMS Europe. is responsible for business in Dublin
provides total operations and product development,
outsourcing solutions client services and insurer
to global investment relations.

Hedge funds’ future growth and perception among investors

will be significantly influenced by their administrative procedures.
ISJ brings together hedge fund servicing experts.
1. The drive for independent administration has been a key fully aware that this will come at a price. The attractiveness of
element in the reassessment of hedge funds’ operations in the returns from alternative investments is not in dispute; what
the capital markets. How will it affect the funds’ operations to is not acceptable is for investors to experience shocks or losses
comply – will it be a significant burden? from avoidable non-investment scenarios, as they did in 2008.
Fortunately for the alternatives industry, there is no shortage of
GRAY: The administration model has matured very well and is actu- published guidance on best practise nor is there a lack of suit-
ally the standard for hedge funds with European investment man- able high-quality partners, with a diverse range of banking and
agers. Administrators have generally developed their operational administration capabilities, to provide the solutions the investors
infrastructure in a way that they do not prove to be an operational require.
burden on the hedge funds operations. Quite the opposite actu-
ally. They will have developed flexible trade capture modules with DILLON: I don’t think it will be a significant burden to hedge funds’
a goal of making it extremely easy for investment managers to operations. This has traditionally been a feature of the US market
deliver trade information directly to the administrator. They will where the requirement for an independent administrator did not
also interact directly with third parties such as prime brokers and exist. An independent administrator may actually bring some ef-
pricing vendors, again with minimal burden on the actual fund. ficiency to the operation.
The US is also where we have experienced the majority of fund
ALSHEFSKI: Institutions aren’t waiting for regulation. They are blow ups. Whilst there is no direct correlation between the two I
driving the requirements of what managers need to provide and think having an independent administrator is going to be one of
there is more emphasis being placed on independent administra- the key factors in restoring/maintaining investor confidence. It
tion. Certainly this is good for our business, but more importantly, may also help in building a more positive image for the hedge fund
we think this is move in the right direction to regain some of the industry in the mainstream media where, mistakenly, hedge funds
trust lost by investors from recent events. are often portrayed in a poor light.
Along with pressure from their investors, managers are finding
that the rationale for outsourcing makes sense in this environ- O’ DWYER: Recent scandals have highlighted the need for fund
ment. Managers want to avoid large capital expenses involved with managers to scrutinise their operational risk. Having all, or sev-
building or maintaining technology, system upgrades, disaster eral, core relationships with one financial firm has increased this
recovery, and so forth. Also, in this incredible competitive and risk and the potential for conflicts of interest. If fund managers
challenging market, firms want all their resources focused on their wish to attract new capital and restore faith they need to ensure
core competencies—managing assets and servicing clients. that no such conflicts of interest arise.
At the forefront of these concerns is the drive for independent
ALDRICH: Investors are demanding higher levels of transparency administration and so, regardless of the perceived burden and
and governance for their hedge fund investments, and they are however costly and complicated the process, the vast majority of


1-23 ISJ40 Final MLa.indd 17 09/06/2009 13:24

Panel Debate ISJ Investor Services Journal
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funds will have to move to some form of brokers. particular to ensure valuable control on
independent administration. For the administration of funds of hedge rehypothecation.
Handing over control of this important funds, SEI currently provides an in-house Following the collapse of Lehman
internal process will not come easy to custody solution which is integrated with Brothers, the takeover of Bear Stearns
many funds and while investors are the administration services for cash and and the widespread concerns in Q3
insisting on the involvement of an indepen- external hedge fund investments in order of 2008 over other prime brokers, many
dent third party administrator, some large to satisfy various US and offshore hedge fund promoters and investors have
hedge funds are still not giving everything regulatory requirements as well as third- been reconsidering their relationships with
away. party fund requirements such credit provid- prime brokers. Various alternative courses
In the US in particular, where self admin- ers and end investors. of action have been taken, which include
istration is the norm, we may see some multiple PB relationships, seeking to put
form of parallel process where an indepen- ALDRICH: The role of a custodian is funda- cash with third party banks and the use
dent administrator runs the numbers to mentally to protect investor assets. The of custodians, or trustees, even where,
satisfy client demand, but the fund keeps value of a strong, preferably Aaa rated, as in the case of Cayman funds, such use
on doing the work in-house as well. Many balance sheet to investors is very clear, of custodians is not legally required. This
of these fund managers believe they know in terms of security, scalability, reach, is a developing area and the final default
their assets better than anyone else and as infrastructure and quality. The immedi- trend for non-EU hedge funds has not yet
such, even if a hedge fund were happy to ate benefits that a custody bank servicing emerged.
outsource its administrative operations to USD20 trillion dollars of assets is able to In addition, there is still not uniformity
satisfy investor demands for transparency bring to the USD1 tn hedge fund industry as between regulators concerning the
and independence, they may not switch off are manifold. liabilities and responsibilities of global
all accounting functions they have built up custodians, as has been seen with regard
over the years.
“I think the area of to the Madoff feeder funds in different
2. What benefits are there to the hedge
fund client as a large custodian bank or segregated accounts 3. As hedge funds seek assets the inves-
will continue to be tor is in some ways empowered in the
specifications of how they are served
GRAY: I would come at this from a different – a good example is in the demand for
angle. While certain benefits may accrue driven by how big the segregated accounts. Does this pose any
to particular fund structures from using additional problems for the administra-
a large custodian bank as administrator investment mandate tor, and how best can they be dealt with?
there are actually more significant benefits
for most funds in using a specialized ad- is going to be” GRAY: While there are a significant number
ministrator who is dedicated to the admin- of common areas between segregated
istration space. A specialized administrator
is likely to be more focused and flexible in
Andrew Dillon, or managed accounts and hedge fund
structures, there are also a number key
the provision of their service. We have seen
certain instances over the last few months
Baronsmead Partners differences. The documentation around
individual managed accounts may not
where the provision of administration naturally provide for a third party admin-
services by large custodian banks has been DILLON: Last year when many prime bro- istrator to value the account or may not
negatively impacted by stresses on other kers were experiencing financial difficul- provide the depth of information available
parts of the custodian banks model. Plug- ties, there were numerous large transfers through a more traditional fund prospectus
ging into a specialized administrator allows of assets to the global custodian banks. document. Additional difficulties may also
hedge funds to develop a ‘best of breed’ In a time of great uncertainty they were arise with asset identification or individual
model whereby each of the distinct services seen as the safest haven for fund assets. As valuation issues, particularly as there is
they receive, such as custody, prime bro- there is currently not the same demand for no distinct ‘board of directors’ acting to
kerage, administration, is not dependent leverage, many hedge funds could conceiv- set valuation policy and provide clarity
on another key service. ably use a global custodian to support their on ‘grey’ areas. Administrators need to be
strategy. In the more regulated jurisdic- extremely clear on the terms and form of
ALSHEFSKI: We are a financial stable, tions the fiduciary responsibilities of the the documentation under which they are to
independent administrator that has grown global custodians may also give a greater administer the account
to administer over $354 billion in assets degree of comfort to investors.
organically. ALSHEFSKI: Investors are now in the
Increasingly, for single manager hedge O’DWYER: In Europe, hedge funds, which driver’s seat and dictating the use of
funds and managed accounts, we’ve seen are regulated as qualifying, or professional managed accounts to give them more
managers and investors wanting to be flex- investor funds fall under the Non-UCITS transparency, control and liquidity. While
ible their custody/prime broker selection regime and as such are required to safekeep the economics for managers may be less
and/or want to use multiple prime brokers their assets with a custodian. The Irish compelling than with their pooled vehicles,
or custodians. Using an open architecture model, which is well developed, has very managed accounts do present a valuable
approach, we can easily integrate these specific investor protection rules where a opportunity to attract clients and assets
best-in-class providers as part of our prime broker acts as custodian. The in this market climate. Given that they are
solution and currently maintain over 30 Irish rules also set out detailed collateral operationally more complex, many of our
relationships with custodians and prime and other prudential requirements, in clients have come to us to help them set up


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ISJ Investor Services Journal Panel Debate

their managed accounts. Our operational recent moves have shown that certain also has been evolving in 2009. The EU’s
environment can easily accommodate man- groups of regulators may move in a uniform own consultation paper in advance of the
aged accounts and we’ve been servicing direction, making demands of investment new draft AIFM Directive identified that
them since 2003 managers or hedge funds domiciled in their the amount of leverage in hedge funds
jurisdictions directly, however it is difficult globally was quite low at 1.4 to 1.7 times
ALDRICH: A segregated, or managed, to see that all hedge funds will move to- equity, (albeit that the EU considered this
account provides equivalent servicing wards a common model. There will continue “significant”).
requirements to an administrator as a to be a range of hedge fund product avail- Liquidity issues have tended to arise more
fund, but normally without the full transfer able, some of which will indeed need to live in funds of hedge funds where the drive by
agency demands. A plethora of segregated within new tighter regulations, perhaps some investors for cash has forced the FOFs
accounts is require a similar headcount to around liquidity or valuation for example, to seek liquidity from the single strategy
service as the same number of funds. The but some hedge fund product will be struc- underlying funds, which in some cases has
manager may be the most stressed party in tured in a manner to be more ‘flexible’, for caused gates or side pockets to be imposed.
the equation when the assets are split into want of a term. In the past quarter, a lot of these prob-
multiple slices, especially if the hedge fund ALDRICH: Increased regulation designed lems would anecdotally seem to be easing
manager has been set up operationally to for the benefit of investors will be em- and indeed liquidity is often coming out to
handle everything in pooled vehicles and investors faster than anticipated. What
now has to allocate to multiple buckets in a
way that is normal in the long-only world. “Administrators may evolve is a more sophisticated form
of rolling liquidity management in new
Not all asset types lend themselves easily
to high levels of allocations into non-stan- need to be extremely FOFs going forward, but this is probably
more likely to be market lead rather than
dard dealing shapes.
clear on the terms imposed by regulators, who are behind the
market on this issue at the moment.
DILLON I think the area of segregated ac-
counts will continue to be driven by how and form of the 5. Do you see any pertinent changes
big the investment mandate is going to be. around the area of valuation?
There is a greater degree of administration documentation
to handle multiple segregated accounts/ GRAY: This area continues to evolve, even
portfolios. The investment needs to be under which they are without direct regulatory involvement.
sizeable enough to merit incurring this For example the market has already made
additional cost. to administer the moves away from counterparty pricing,
which was accepted practice a very short
O’ DWYER Transparency is at the heart of
this shift in power as investors concentrate
account” time ago. As instruments continue to
evolve, the valuation area has continued
as much on operational risk as previously
on performance risk.
Gavin Gray, Phoenix to develop. Administrators continue to
evolve pricing matrices for the variety of
In the future, investors will demand more
openness about the investment portfo-
Fund Services instruments they price. These matrices
will include preferred primary sources and
lios, fee arrangements, asset valuation secondary sources for prices as well as
models and performance monitoring. Also braced by the alternatives industry and in- highlighting overriding guidelines, such as
investors are increasingly seeking indepen- corporated seamlessly into new structures ensuring prices are received directly from
dent verification and assurances of quality, and vehicles. Regulation that is purely third party vendors.
concerning service providers. politically motivated will meet a much
We are seeing increasing due diligence less favourable response and could end up ALSHEFSKI: Hedge fund managers have
from investors of service providers being completely counter-productive. The historically been hesitant to fully delegate
and boards, not least post Madoff. While industry, through bodies such as AIMA, responsibility to a 3rd party administrator
initially time consuming and often tedious, IFIA and IOSCO, is actively engaging with to independently value their investments,
we strongly support the move to more in- regulators in every jurisdiction to ensure especially as it relates to OTC derivatives,
vestor due diligence as it can only improve that we achieve a result collectively that less liquid positions and private deals for
overall industry quality and help build the is to the benefit of the customers that pay two reasons. One, the investment man-
businesses of the quality administrators, the bills, the end-investors such as public ager maintains ultimate responsibility and
who have invested in strong risk manage- pension funds. discretion of valuation as typically outlined
ment systems and good people. in the fund’s legal documents. Two, the
DILLON: It will be interesting to see how investment manager may be closer to the
4. Do you anticipate any additional this develops over the next while. Many market and investment strategy and is in a
strictures that market regulators will ask fund boards had to make difficult decisions better position to truly understand and de-
of hedge funds –around liquidity provi- with regards to imposing “gates” during termine an investment’s value. It has been
sions for example – that might affect the the second half of 2008. It will be understood in the industry that a hedge
task of administering and accounting the interesting to see how investors react to fund administrator would add value to
funds? this and whether we see any litigation on the valuation process for exchange traded
the back of it. securities by employing 3rd party market
GRAY: I think regulators requirements of O’DWYER: The issue of liquidity in hedge data, but that the investment manager
hedge funds will continue to evolve. The funds has been complicated recently and would most likely derive, via established


1-23 ISJ40 Final MLa.indd 19 09/06/2009 13:24

Panel Debate ISJ Investor Services Journal
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models or broker/counterparty quotes, and GRAY: UCITS products certainly make differ- transparent reporting on an ongoing basis.
potentially override administrator-sourced ent demands of administrators. While the Since SEI already had the systems and pro-
prices for non-exchange traded securities. portfolio in general may look and feel more cesses in place for traditional asset classes
This has changed in the last year. Inves- ‘traditional’, the portfolio may continue and alternative investments, we are easily
tors are requiring a greater level of inde- to use extremely complex derivatives for able to assist managers looking to move to
pendence and oversight of the valuation the UCITS space.
process. Investment managers are more
receptive to finding a way to incorporate
“Transparency ALDRICH: Administrators cannot be one
the administrator in the process whether
it be from a primary source perspective or
is at the heart trick ponies, they must be able to value a
manager’s funds across all portfolios, do-
reasonableness reviews as compared to a
secondary independent source or tolerance
of this shift in miciles, valuation periods, strategies and
jurisdictions. The 21st century manager
reviews. power as investors is not constrained by historic definitions
of what constitutes a long-only or alterna-
ALDRICH: Valuation is a key area where
improved standards of governance have
concentrate as much tive fund, and the expansion into UCITs
space by so-called “hedge” fund managers
resulted in greater transparency and con-
sistency in NAV production. The increased
on operational risk is only the most recent development of a
well established and growing trend. An
use of third-party valuation agents in the
United States, already standard practise in
as previously on administrator now needs to demonstrate
more value to the new “multi-capability”
Europe since the industry grew internation-
ally, is to be welcomed. Greater availability
performance risk” firms and deliver a range of additional
capabilities in custody, cash management,
of complex valuation pricing vendors has
decreased the variability of valuations on
Peter O’ Dwyer, FX, collateral management and middle of-
fice outsourcing.
some more sophisticated instruments,
which is appreciated by investors in mul- Trinity Fund DILLON: Many hedge fund managers have
tiple funds with similar portfolios.
Administration run “traditional” or UCITS type strategies
for many years already. I think we are likely
DILLON: I think that many fund boards to see an increase in the number of
have had to take a more hands on approach efficient portfolio management. The UCITS managers wishing to do so at present
where there have been a large number structure will also typically mean additional and in the medium term future purely on
of illiquid positions in a funds portfolio. reporting lines, such as to a trustee or the basis that raising assets at present is
Whilst this exposes them to a higher level depositary. Rather than making the admin- difficult. Under the more relaxed UCITS
of litigation risk from in investors in the istrator’s job easier it is a case of ensuring investment restrictions there are numerous
event of something going wrong, they are the administrator can interact with the key hedge fund strategies that fit the UCITS
ultimately responsible for ensuring that third parties in a UCITS structure to ensure brand.
valuations are as accurate and prudent as they are all provided with the relevant
possible. information in a timely manner. This there O’DWYER: There’s no doubt that hedge
are different demands, such as a flexibility funds are under much more pressure to
O’DWYER: Institutional clients are now of reporting from the administrator as they demonstrate that they have sound opera-
demanding independent valuations and may need to deliver different information tions and that funds are valued using
an enhancement of transparency. We have packages to the investment manager, the transparent methodology.
seen a need for a more frequent valuation manager, the trustee, the board and a 3rd As these are underlying characteristics of
cycle, moving toward daily pricing, where party who may be providing risk manage- UCITS, administrators such as Trinity, who
it is possible and indeed a few clients have ment oversight on behalf of the board or have a lot of experience and expertise with
requested these services in the last year. manager. these funds, will enjoy a more seamless
There has also been a continued con- and stable experience working with hedge
vergence between the managed account ALSHEFSKI: Since establishing our offshore funds that cross over to this space.
platform and the fund offering. In light office in Dublin in 1995, SEI has been The differing treatment by different
of these changes we have been able to providing investment managers with the regulators of UCITS, which in turn invest
enhance our STP processing to incorporate necessary tools and services to administer in other UCITS, who have alternative as-
the demand for more frequent and indeed UCITS funds. We have seen more hedge sets, carries with it the potential for some
more complex valuations and move into the fund managers switching to the UCITS confusion. While the valuation of UCITS is
provision of a managed accounts platform products, because of changes within the prima facie simpler than some hedge fund
through our technology platform. regulatory framework in Europe under valuations, for hedgies to see UCITS as “the
UCITS III that allow managers to bring solution” is simplistic.
6. More hedge funds are seeking assets some of the expertise and experience ob- Undoubtedly, the alternative community
under management by crossing over into tained within the hedge fund world to the can be expected to get stuck into the
the UCITS space. Does this make the ad- mainstream of private investors. deliberations over UCITS IV, to get a better
ministrator’s job easier to have parts of Under the UCITS III requirements, more “cross over” product, all of which goes to
the fund’s overall operation in the more and more emphasis has been placed on the blur the boundaries between alternatives
‘traditional’, transparent space? administrator and custodian to provide and more traditional mutual funds. n


1-23 ISJ40 Final MLa.indd 20 09/06/2009 13:24

Thoughts and observations from Jane Milner SunGard,
Securities Finance Strategy and Marketing
What were your overall impressions the lending process in order to remain fully
of the event? engaged. The views of insurance compa-
I think it was timely, well structured, and as nies and pension funds were represented
a discussion based, local, half day event along with those of a custodian lender. The
it offered a format welcomed by market par- presence on the panel of a representative
ticipants. The topic of Lending for Liquidity of a legal consulting firm highlighted the
is certainly ‘of the moment’ and resonated unusual times that we are facing, and there
well with the audience, drawing out good was discussion around the question of
audience participation. The Summit at- ‘who owns the risk’ and the division of re-
tracted a sizable audience from a cross sponsibility between beneficial owners and
section of the securities finance community, their lending agents/advisors. Their discus-
and I believe it set a good precedent for sions questioned whether the recent focus
future events. on risk (in particular cash re-investment risk)
was due to lack of transparency on behalf
Was there much evidence of the of the agents, or beneficial owners being
fallout from the financial crisis in the caught ‘asleep at the wheel’. Regardless
general mood at the event? of where blame lies, the unprecedented
The financial crisis is never far from any- recent events certainly brought into sharp
one’s mind, but the general mood was one focus the need for greater transparency
that GC lending in major indices will move
of relief that the worst is perceived to be and further education of the risks and
into the world of ETFs versus a swap rather
over, combined with the natural optimism rewards of securities finance.
than traditional stock loan.
Ò The topic of
of many in this market. There was a feeling
that the ‘let’s wait and see what hap-
The need to invest in solutions to
Lending for
pens next’ concerns are gradually being
manage the securities lending pro-
addressed, supply and demand is slowly
cess more efficiently is a perennial
returning, bringing with it an increased abil-
ity to invest in the future. This is resulting Liquidity is certainly discussion; did this get much air time
at the event?
in the recommencement of hiring in some
quarters, and the consideration of additional Ô of the momentÕ and This was not directly on the agenda for the

resonated well with

event, however, the need for greater
investment from a systems perspective to
control and transparency was touched
address new market conditions.
the audienceÓ
on in both panel sessions. Clearly recent
market events mean that there is a close
What were the headline topics dis-
Jane Milner,
eye on the cost situation when looking at
cussed and how were they
future investments and projects. Technol-
The headline topic was market liquidity and
the part that securities lending plays as a
SunGard ogy and automation can drive cost savings
so even though there is a downturn,
technology is still a high priority. As solution
vital source of liquidity to the wider markets. The second panel was around what
providers we have been extremely busy
The ‘State of the Industry’ address gave the future might hold for Securities
during the last six to nine months, which
statistics on what has happened to supply, Lending, were there any startling or
may seem strange given current market
demand and spreads over recent months, contentious predictions?
conditions, however firms recognise more
and gave a somewhat sceptical view of This was an interesting panel, primarily
today than ever before how important it is
what is seen by some as ‘green shoots’ made up of market participants from the
to continually review and expand technol-
of recovery. James Clunie gave a gallop ‘buy’ side. It focused on what changes
ogy in order to give them an edge.
through the history of academic research there might be to the existing business
into short selling, and concluded that the models. The question of whether the Prime
How does SunGard’s participation at
recent bans had demonstrated once again, Broker is dead was debated, with the
events such as this benefit your cus-
that there is no evidence to support the outcome that the model was not entirely
tomers? Did you come back with lots
bad press which short selling periodically broken but would need to evolve as a result
of ideas for new developments?
receives. Two panels then focused on dif- of fall-out from the Lehman default. It also
One of the main reasons we go to events
ferent aspects of what needs to happen to considered whether the introduction of
such as this is to take the pulse on the
fuel the return of liquidity through lending. central counterparties will speed the transi-
market and to see in which direction we
tion from bi-lateral trading to an exchange
need to evolve and enhance our products.
You participated in the ‘Securities traded model. The consensus was that this
We believe that we are heading in the right
Lending – a Front Office Investment?’ would provide further choice, as opposed
direction but there is always room to listen
panel, what were the dominant to a mainstream change, and that the in-
and learn from leaders in the market. We
themes from that came out? creased transparency, reduction in bi-lateral
continue to work closely with clients to
Much of the focus was on beneficial own- risk and balance sheet efficiency that a
provide solutions to support their ongoing
ers and how important it is for them to have central counterparty promises would be
and new business developments.
an understanding of the wider benefits of welcomed. An interesting prediction was


1-23 ISJ40 Final MLa.indd 21 09/06/2009 13:24

Analyse This ISJ Investor Services Journal
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Analyse This: Clearing/Settlement

Question: How are Europe’s settlement Question: How
infrastructure providers aiding firms in can increased
better managing risks and liquidity? competition and
Answered by Martin Ingell, group head of interoperability
operational risk at Euroclear boost the CCP
Central to clients is collateralised. Thus, market structure?
Euroclear Bank’s credit exposure on
Lehman Brothers was fully covered
Answered by Marco
(CSDs) are and was closed out without any Strimer, CEO of SIX
contributing to loss or disruption to clients or the
market stability market. Because Euroclear Bank is x-clear
during these a single purpose bank, i.e. intra-day
challenging times, credit is extended exclusively to avoid In the midst of
as recognised by market leaders like settlement fails, this type of credit risk an economic
Baron Lamfalussy, who recently stated: is isolated and managed precisely. crisis not seen
“The clearing, settlement and payment We are also seeing financial in decades,
systems deserve particular praise. Few institutions turning to market clearing and
people, including financial market infrastructures to help them achieve settlement has
participants, let alone governments their own objectives. emerged as
and the general public, are aware of the For example, throughout the recent one of the few
amount of effort that has been invested liquidity crisis, the international CSDs success stories of 2008.
over the past 20 years into enhancing served as vital pools of intra-day The successful transfer of trades
the crisis resistance of these systems. liquidity when the interbank lending following Lehman Brothers historic
The investment has been rewarded by market dried up, without impacting collapse in September 2008 was
high returns.” securities settlement efficiency. a major component in the clean-
CSDs are increasingly recognised as At Euroclear, we are also working up operation and firmly placed
‘safe harbours’ by market participants to help clients gain access to central the spotlight on the clearing and
due to their ultra-conservative risk bank liquidity by managing the settlement operations that underpin
profiles. Most domestic CSDs function collateral requirements for them. many markets. Those previously
without taking on any credit risk and Moreover, Euroclear’s Single Platform uninterested in the back office
without needing liquidity themselves, programme will enable clients to ‘plumbing’ of the industry now
as the cash component of a transaction pool collateral from seven European recognise that clearing houses, or
settles with the CSD’s national central markets to optimise their liquidity and central counter-parties (CCPs), are
bank. collateral management possibilities. a key component of the post-trade
The ICSDs and a few domestic CSDs It will also provide clients with access infrastructure.
provide intra-day credit to qualifying to a wider range of counterparties A CCP stands between parties
clients using well-controlled credit for securities financing and broader in case of default and act much like
assessment and risk-management trading strategies. And, we are taking an insurance agent – serving as a
procedures. Lehman Brothers’ default is the right precautionary measures to buyer to every seller and a seller to
still fresh in our minds and serves as a ensure a consistently robust and secure every buyer in a transaction, using
reminder of the compulsion of having settlement infrastructure is in place, pooled collateral posted by market
resilient risk- management methods including investment in state-of-the- participants to guarantee that trades
in place, for clients and infrastructure art business continuity arrangements, are completed.
providers alike. including multiple data centres and They have grown alongside the
At Euroclear Bank, the only ICSD with dual-office operations. n alternate trading venues, the so-called
a AA+ rating, 99% of credit extended multi-lateral trading facilities (MTFs),


1-23 ISJ40 Final MLa.indd 22 09/06/2009 13:24

ISJ Investor Services Journal Analyse This

Question: What strengths and advances are

that emerged in the wake of the Markets
in Financial Instruments Directive
there in FX clearing and settlement after a
(MiFID) reforms of 2007 to challenge major bank default?
the traditional dominance enjoyed
by stalwarts like the London Stock Answered by Jonathan Butterfield, director
CCPs such as SIX x-clear have
of communications at CLS Group
pushed forward to encourage
competition and foster interoperability The week of and processes of the ‘Buy-Side’ is
across the CCP market structure. September particularly high, and, has lead to a
Competition within clearing has been 15th, 2008, record level of enquiries about CLS
focussed on the interoperability – will always be participation.
an agreement between CCPs and remembered Arguably there is still some way to
exchanges allowing their customers for the collapse go until the interbank standards are
to have trades cleared across either of Lehman universally applied, the recent growth in
CCP platform. SIX x-clear is a fierce Brothers. our participants has been encouraging,
proponent of interoperability and Abruptly losing with the total number of market
believes that it benefits customers by one of the biggest players in FX was a participants currently standing at 5,000
providing the choice and efficiencies defining moment in a week the industry
needed to navigate the fragmented demonstrated how a global market had “Despite being
trading landscape.
The European Commission threw
indeed learnt from earlier failures. The
sheer daily size or value of this market unregulated per
its weight behind interoperability with
the Brussels-brokered 2006 Code of
had made this an imperative.
This was a week that the FX market’s
se, the FX industry
Conduct. The code had its first success robust infrastructure survived the remains resilient
on these shores in December 2008
when the LSE allowed its clients a
sternest of tests, with CLS Bank – which
has been eliminating settlement risk in to the accelerated
choice of CCP provider and SIX x-clear
joined LCH.Clearnet as the exchange
the multi trillion dollar a day market
for over six years – delivering orderly
growth in trading“
embraced interoperability. UBS, the settlement of all submitted trades from The rapid automation of FX trading
largest single provider of trading Lehman Brothers and simultaneously undergone over the past three years
liquidity on the LSE, immediately setting a new record for the volume has introduced new challenges and
moved all UK equities to SIX x-clear, settled in a single day on September 17th operational risks to the market. Wider
allowing the bank to combine its UK – 1.5million payment instructions with a participation and potential capacity
flow at one clearer and thereby drive value of USD8.6trillion. constraints provided the impetus behind
down the unit cost of clearing. UBS’s Counterparties defaulting in the the recently announced JV between CLS
implementation highlights the worth settlement of a foreign exchange and ICAP.
of the dual CCP model – namely the transaction – or FX settlement risk – The JV will provide post trade
ability to pass cost and operational first came to light in the 1970s with the aggregation services to its members
benefits on to clients. collapse of Herstatt Bank, but the events trading spot FX, in a bid to extract
Although the development of of last September and unprecedented significant operational risk from the
interoperability has been a prolonged market volatility has propelled wider market, reduce costs to reshape the post-
affair, the industry is certainly moving counterparty, credit and operational trade processing landscape with the goal
in the right direction. Since the LSE’s risk management to the very top of the of delivering the next level of efficiency
decision we have seen Chi-X, Turquoise, industry and regulatory agenda. for this high frequency segment of the
BATS Trading and NYSE Arca Europe Despite being unregulated per se, market.
all proclaim the merits of a competitive the FX industry remains resilient to Though the FX market is considered
clearing system. Clearing choice in the the accelerated growth in trading by mature in terms of its practices and
form of a ‘one stop shop’ for customers a widening group of investors and operational infrastructure the adoption
can only be seen as positive for the traders; hedge funds, long money of automated trading and trading
market as a way of reducing costs by funds, algorithmic traders and more strategies is a reminder and an example
allowing more efficient cross netting recently retail participants. The of the innovation and change in this
over a number of execution venues on pressure to improve the infrastructure diverse, global market. n
which the same stocks are traded. n


1-23 ISJ40 Final MLa.indd 23 09/06/2009 13:24

Services ISJ Directory of Services ISJISJInvestor

Asset Servicing
T: +44 (0) 208 760 7130
C: Stephen Everard or
Goal is widely-acknowledged in the financial services sector for its innovative and
Saghar Bigwood
creative solutions to highly-specialized niche processes. A: 7th Floor, 69 Park Lane,
Goal’s research has shown that in excess of USD8 billion of withholding tax remains Croydon, Surrey, CR9 1BG
unclaimed each year by the rightful owners and beneficiaries and that over USD12 E: severard@goalgroup.com or
billion is lost because rightful beneficiaries are not participating in class actions, sbigwood@goalgroup.com or
bankruptcies and disgorgements. info@goalgroup.com
W: www.goalgroup.com


SMA Financial is the UK’s premier provider of SWIFT services and a long standing Simon Murby
business partner of SWIFT. SMA’s vast experience in the banking and securities Managing Director
industry has provided high quality provision of SWIFT related consultancy, training, SMA Financial Limited
system care and bureau services which is second to none. SMA prides itself on their Telephone : +44 (0)20 7940 4200
in-depth and highly experienced team of consultants chosen from the banking and Bramah House,
securities industry. The introduction of the SWIFT bureau service has witnessed much 65-71 Bermondsey Street,
success by providing cost effective and quality hosted connectivity services to many London. SE1 3XF
satisfied clients. Website: www.sma.co.uk

Custody & Clearing

BHF Asset Servicing GmbH comprises the custody, depotbanking and securities services
of BHF-BANK Aktiengesellschaft. With around 250 members of staff, approx. EUR 270 Strahlenbergerstraße 45; 63067
billion in assets under administration and a depotbanking volume of EUR 85 billion, Offenbach a.M. Germany
BHF Asset Servicing GmbH is one of Germany’s leading specialists in depotbanking •Contact: Moritz Ostwald
and custody business. It develops innovative and high-class services for investment •Phone:+49 69 667744 838
companies, institutional investors and foreign banks, and excels at tailoring solutions to •Email: moritz.ostwald@
the individual needs of its clientele.
Assets under Administration: EUR 270 bn
No of funds: 478

DnB NOR is the leading provider of Custody, Clearing and Remote Member Service in T: +47 22 94 92 95
Norway. DnB NOR offers a full range of securities settlement, Corporate Action and cash F: +47 22 48 28 46
management services for both foreign and domestic institutional clients. The bank Contact: Bente I. Hoem, Head of Global
has a strong commitment to the Custody business in Norway and the staff is highly Relations & Network
knowledgeable and experienced. In addition, DnB NOR provides a wide range of value- E: bente.hoem@dnbnor.no
added services for foreign clients such as Securities Lending, Income Collection, Proxy W:www.dnbnor.com
Voting, Tax Reclaim, and MIS reporting.
As the largest commercial bank in Norway, DnB NOR offers clients full services in
securities trading, registration, foreign exchange and Money Market.

Banking Securities Services provides award winning local and regional custody services For further information please contact
for investment professionals. We are proud to be the largest custodian provider in Lilla Juranyi, Global Head Custody
terms of assets and number of foreign clients in Central & Eastern Europe. ING has been at + 31 20 7979 435
providing Securities Services in CEE since 1994 and we will continue our ongoing pursuit or contact her by email:
of excellence through new technology. Innovation and client focus are the key drivers Lilla.Juranyi@mail.ing.nl
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.

Intesa Sanpaolo’s Transaction Services include : Piazza della Scala 6

• Sub Custody, Derivatives and Remote Membership Clearing
20121 Milan, Italy
• Global Custody and Depository Bank for mutual funds, pension funds, real
T: +39 02 8794 2466
estate funds, private equity funds and hedge funds
• Fund Administration for mutual funds, pension funds, real estate funds, F: +39 02 8794 1519
private equity funds and hedge funds W: intesasanpaolo.com
• Paying Agent for foreign funds and sicavs C: Riccardo Lamanna
• Cash and Payment services like swift to checks, mass payments, checks and E: riccardo.lamanna@
cash letters intesasanpaolo.com


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ISJ Investor
ISJ Investor Services
Services Journal
Journal ISJDirectory
ISJ DirectoryofofServices
Nordea is the leading financial services group in the Nordic and Baltic region and operates
through three business areas: Nordic Banking, Private Banking and Institutional &
International Banking. Nordea is the leading custody services provider in the region. Nordea
provides high quality, tailor-made custody services for local and foreign investors dealing with Contact:
Nordic and Baltic securities. Due to the unique history of being formed from four established Nina Groth
banks, Nordea is the only Nordic custody provider with strong local presence and expertise in all Head of Sub-custody and Clearing
four markets. Nordea combines Nordic competence with local expertise, and has proven ability Tel: +45 3333 6124
to deliver high quality services that meet both clients’ and each local market’s requirements. E-mail: nina.groth@nordea.com
Leading Nordic custodian: Critical mass and resources available; deep local experience and
active involvement in each Nordic market; Complete operational capabilities and best-fit
systems developed in each Nordic market; Proven ability to deliver high-quality service in all
Nordic markets; Excellent connection with key players in all Nordic Markets; Extensive product
and service offering; Your single point of entry to the whole Nordic region.

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

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

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

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

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

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


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ISJ Directory of Services ISJISJInvestor

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

Swedbank provides client-focused custody services to domestic and international

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

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

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

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

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


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ISJ Investor
ISJ Investor Services
Services Journal
Journal ISJDirectory
ISJ DirectoryofofServices

Intesa Sanpaolo’s Transaction Services include : Piazza della Scala 6

• Sub Custody, Derivatives and Remote Membership Clearing
20121 Milan, Italy
• Global Custody and Depository Bank for mutual funds, pension funds, real
T: +39 02 8794 2466
estate funds, private equity funds and hedge funds
• Fund Administration for mutual funds, pension funds, real estate funds, F: +39 02 8794 1519
private equity funds and hedge funds W: intesasanpaolo.com
• Paying Agent for foreign funds and sicavs C: Riccardo Lamanna
• Cash and Payment services like swift to checks, mass payments, checks and E: riccardo.lamanna@
cash letters intesasanpaolo.com

Société Générale Securities Services offers institutional investors, asset

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

Swiss Financial Services

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

Luxembourg: Jean-Paul Gennari,

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

Hedge Fund Administration

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

Custom House Administration &

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


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ISJ Directory of Services ISJISJInvestor

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

International Finance Centres

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

Payments & Settlements

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

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

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


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

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

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

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

Santander is the only Spanish financial institution with a team exclusively

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

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

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


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ISJ Directory
Technologyof Services ISJISJInvestor

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

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

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

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

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

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

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

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 SunGard Global Trading
financial services companies. 25 Canada Square, London E14 5LQ

Tel +44 (0)20 8081 2000

Dedicated to post trade securities operations, GL RIMS is your comprehensive real time
securities post execution processing solution, covering middle office, settlement and
Fax +44 (0)20 8081 3399
accounting requirements. Its wide use of automation enables global capital markets
organisation to achieve maximum STP. It is a flexible, highly scalable and easy to install www.sungard.com/globaltrading
platform with a new Service Oriented Architecture feature that allows smooth and
efficient connections with other third parties within a company. Email: info.globaltrading@sungard.com


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ISJ Investor
ISJ Investor Services
Services Journal
Journal ISJDirectory
ISJ DirectoryofofServices

A:IGEFI Group Sàrl - 7, Rue des

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

For more information on Information

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

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

Misys provides integrated, comprehensive solutions that deliver significant results to

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

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

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

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


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ISJ Directory of Services ISJISJInvestor

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

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

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

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

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

SimCorp Dimension is a powerful, comprehensive and truly seamless investment

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


24-32 Directory ISJ40 Final ML.indd 32 10/06/2009 17:07

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Front Cover ISJ40.indd 4 09/06/2009 16:08