At EUR6.3 trillion ($8.5 trillion), the European investment funds
industry is about a third smaller than the U.S. mutual fund
industry, but in terms of infrastructure and automation
challenges--transaction processing and information transmission
among fund managers, distributors and promoters--it is about where
the U.S. was two decades ago. It can cost up to EUR50 to handle a
cross-border fund transaction manually, not including error
resolution. Automation brings that down to an estimated EUR5.
With investors no longer restricted to buying funds in their
home markets, thanks to easing of regulatory constraints,
cross-border investing is on the rise, and with it the potential
for miscommunication and its multiples of added costs. One solution
that some have advocated is a European version of the automated
Fund-Serv utility operated by the U.S. Depository Trust &
Clearing Corp. (DTCC). But Europeans have balked at that idea,
questioning whether that model would be suited to cross-border
market needs.
The six-year-old FundSettle and Vestima+ services of
international central securities depositories (ICSDs) Euroclear and
Clearstream, respectively, have captured much of the limelight in
the European funds industry as platforms from custodian banks have
shown mixed results. While both Euroclear and Clearstream initially
bundled services ranging from order routing to settlement,
Clearstream's investment funds product has undergone a radical
overhaul, largely resulting from Clearstream's acquisition of
France's Filinks order routing system in 2002. By decoupling order
routing from settlement under the rebranded Vestima+, Clearstream
allows clients to settle where they want--through local
depositories, Euroclear France or Clearstream Banking Frankfurt,
for example--or internally through electronic transfers on the
accounts of the fund distributor. |
