In the funds industry, the business of transfer agency has often been relegated to the lower end of the fund distribution value chain, with distribution and performance issues taking precedence.
There is no doubt however that although it might be underrated at times, transfer agency is indeed a critical function. Notably, as the European mutual funds industry goes global, the role of the transfer agent (TA) which has traditionally involved shareholder maintenance, transaction processing and reporting, has entered a new era and taken on new dimensions.
“Transfer Agency is one of the main differentiators in the fund industry today and we see more and more opportunities to provide added value services, especially in the fast growing third party cross-border fund distribution context,” notes Olivier Portenseigne, Head of Shareholder Services at RBC Dexia Investor Services Bank.
“Transfer agents are increasingly being asked to provide services beyond the standard TA functions,” remarks Josée Denis, global transfer agency product specialist at BNY
Mellon Asset Servicing. With the growth in global cross-border distribution of mutual funds, global distribution support is one of the main value add services that TAs are now expected to provide, she says.
“It is a key given today that TAs need to act as partners, handholding clients in their business development and global distribution strategy as they enter new geographies, and offer local expertise in these markets. Having the ability to provide distribution support is essential today if one wants to be a global player in the TA space.” BNY Mellon, she says, has five dedicated TA support hubs in Europe and Asia servicing approximately 140 fund groups and supporting over 60 countries of distribution worldwide.
Julien Cuminet, head of global transfer agency and retail at BNP Paribas Securities Services agrees. Distribution support has of late become essential, he says to give promoters the opportunity to be distributed locally, regionally and globally for different investors either retail or institutional.
“If you want to be a key global player on fund distribution, then you have to be present on both sides – at the promoter’s side to provide them core services and at the distributor’s side to provide value added services such as order routing, execution, settlement and negotiation and calculation of the trailer fees,” he says.
Mr Portenseigne says that RBC Dexia has a distribution support platform that targets both fund promoters and institutional investors including distributors, private/retail banks, insurance companies and fund supermarkets. “Transfer Agency and distribution support platform services are among the most visible products to the exter-nal world and hence are key elements in the value chain, bringing competitive advantage to asset managers in terms of operating model, managing complex products and supporting global distribution.”
The phenomenal growth in the global distribution of European investment funds has primarily been driven by the Ucits (Undertakings for Collective Investment in Transferable Securities) Directive, a set of EU wide rules that facilitate the cross-border offer of collective investment funds.
Consulting firm PricewaterhouseCoopers (PwC) estimates that, in 2007, almost 6000 Ucits funds were sold cross-border, with total registrations being around 50,000, a 60 per cent growth over 2005 and an over 100 per cent growth over 2002.
Moreover, with investors having globally accepted Ucits as providing high quality well regulated investment products with significant levels of investor protection, Ucits have gained in popularity beyond the European Union (EU) as well. PwC states that in 2007, apart from Europe, Ucits distribution was primarily focused on Asia and South America. These two regions along with Switzerland contributed to more than 40 per cent of total Ucits sales.
This rise in global Ucits distribution might have enabled transfer agents to expand the breadth of their service, but this trend has brought up its own issues, namely regarding the transfer agent’s ability to service customers across multiple jurisdictions. “The challenge in providing distribution support, is that services required differ from one country to another,” states Mr Cuminet of BNP Paribas.
The distribution models in the various regions differ vastly, which affects the respective reporting framework, adds Tony Klim, Emea CEO of Bravura Solutions, a global supplier of wealth management and transfer agency solutions.
Explaining some of the challenges of operating globally, Mr Klim says that “in the UK, distribution is largely through fund supermarkets and through independent financial advisors (IFAs), while in Europe and the Far East, fund distribution is through the banking infrastructure. For both these models, the reporting structure is different and that in turn impacts the TA solution.”
A key requirement for TA service providers is to have as best as possible, a single TA operating platform that can operate across multiple jurisdictions, says Ms Denis of BNY Mellon.
