The invisible giant
The Association of the Luxembourg Fund Industry (ALFI) organised earlier this month, the 15th edition of its Transfer Agent (TA) & Distribution Forum. The conference attracted more than 220 investment fund professionals. Even though the Transfer Agent (TA) plays a crucial role in the fund distribution value chain, it is still today, relatively unknown to the public. Many actors within the fund industry call the TA function, “the invisible giant”. Learn why…
What does a TA do?
Historically, the TA has had a long tradition in Luxembourg given the fact that the country was the first European state to adopt the UCITS directive in 1985. The TA exists ever since the very first UCITS was launched in Luxembourg in the mid-80s.
As the most direct link to a Fund’s end investors and distributors, the TA’s main mission is to cover the administration and servicing of investment funds to the Fund, its end investors and distributors of funds. The TA basically has five key areas of operations 1) A dedicated “front office” to support investors and distributors’ communication (i.e., enquiries by phone, mail, web, etc.); 2) Registration – receipt and maintenance of Fund application forms, AML/KYC verification, account opening, account maintenance; 3) Transaction processing – all transaction types related to funds; 4) Cash Management – of the Fund and the investors and distributors payments and finally; 4) Reporting – to investors, distributors, the Fund and other regulatory and tax & legal required documents.
Why is TA so important to Luxembourg?
The fact that Luxembourg, a global cross-border fund market, ranks second as fund centre worldwide after the Unites States (a domestic fund market) keeps the TA very busy. For instance, there are more than 56.000 distribution agreements of Luxembourg funds, across more than 70 countries of direct distribution, whose administration is managed by TAs.
For example, in 2015, 20 (out of 40 regulated TAs) Luxembourg based TA service providers covered over 23 million transactions for that year alone. Given the fact that Luxembourg is a global cross border distribution leader, the majority of Luxembourg TAs cover operations emanating from between 30-70 countries which implicates to deal with the required documentation in the languages of all these respective countries.
ALFI’s engagement towards the TA community in Luxembourg and beyond
The TA & Distribution Forum community was launched in 1999 to give a voice to the Fund Operations community in Luxembourg. This distinct operations community was supported by a dedicated TA Steering Committee (TASC), who was requested to join the Alfi Committee framework in 2004. Today, the TASC has the commitment of 28 organisations comprising of over 43 members, who meet on a monthly basis to discuss the latest TA and Distribution specific regulatory and market developments that directly affect TA service delivery. The TASC also holds an annual conference, the ALFI TA & Distribution Forum event since 2001. The success of this yearly event keeps growing since its inception. From what started as a roundtable discussion of 12 participants in 1999, it has grown into a recognized conference attracting more than 220 industry experts and practitioners, year on, year on.
To continue to lead by example of its TA model on a global cross border community, the TASC recently launched this community in Asia in 2015. With the support of the ALFI representative office in Hong Kong, The Alfi TASC Asia, chaired by Caroline Higgins (Northern Trust Hong Kong), has recently held its very first TA & Asset Servicing Hong Kong Forum 2016 in September.
What is on the mind of TAs today?
With the evolving regulatory landscape of the global fund industry and the ongoing market developments shaping it, it is an opportune time to ascertain the current shape of things “TA & Distribution” most importantly, look ahead as to where the TA industry is heading in view of the regulatory, legal and market changes, present and future.
The key theme of the ALFI TA & Distribution Forum, which took place on 16th of November 2016, was TA 2020 – TA Transformation on its way. This year’s TA Forum 2016 focused on five key drivers that are currently shaping the fund industry’s operational value chain, specifically the TA and distribution operations business model, over the next three to five years:
- FinTech
- Infrastructure
- Distribution
- Product
- Regulatory
220 fund industry experts coming from 12 countries from the US, Hong Kong and the EU listened to high-level speakers representing the TA and Distribution community. 50% of conference participants were “newcomers” which testifies that TA certainly is an appealing topic. All subject matters discussed during the conference were timely, and the conference organisers aimed to provide participants with the maximum of thought provoking insights.
Product convergence of UCITS and Alternatives Investment funds was in the heart of the discussion. Investors’ priorities are constantly evolving, especially in the zero interest rate world. We see that Real Estate and Private Equity funds are in the leading position rather than more traditional UCITS. FinTech & new technology developments are already hugely impacting the operating models of all actors of the investment fund value chain.
Cross border distribution is by definition the nature of TA business and flexibility is part of the TA’s DNA. The distribution markets developments are a constant, with additional emerging markets in Latin America, such as Colombia, now joining the fray for Luxembourg domiciled-funds. No later than a few days ago, ALFI successfully negotiated an exemption from the obligation to hold an Australian financial services (AFS) licence to provide financial services in Australia. This relief will enable Australia’s institutional investors, including superannuation funds, to get easier access to Luxembourg UCITS. This news will definitely influence the global TA business model!
And of course, let’s not forget the evolving regulatory requirements and market developments in the fund space. How will the regulations such as MIFID II, PRIIPS or the proposed Target2Securities (T2S) platform apply to your TA business?
TA transformation is already happening now. You better be ready!
Communiqué par Josée-Lynda Denis, Chairman of the ALFI TA Steering Committee