Bringing funds management into the 21st century – Calastone
NEWS | 07 August 2013
Calastone, the global transaction network for the managed fund industry has automated the manual process of reconciliations of managed fund holdings in Australia.
Calastone MD, Australia, Shannon Sweeney, said the processes that are currently in place to reconcile statements of holdings and transactions currently take up to 15 business days and are intensively manual.
“These processes have remained largely unchanged since the 1980s and involve unacceptable levels of risk,” she said.
“When virtually everything else to do with our finances is electronic, it’s crazy that this important function – which forms part of the backbone of Australians’ superannuation and retail investments – is still being keyed in manually and communicated by fax machine, post or email.”
The most critical thing for individual retail investors is that, should an issue be detected in the reconciliation process, they can be ‘out of the money’ for as long as a month, Ms Sweeney said.
“In a volatile market that means that the historical unit price to correct the issue can be quite significantly different from the one they view their holdings at today,” she added.
“Another key impact of the delay in reconciliations is the delay in applying the income distributions. A distribution is applied to a reconciled holding, so the reconciliation process is a vital precursor to this. Currently it’s taking an unnecessarily long time.”
Ms. Sweeney said the new technology had been embraced by the local funds management community, with netwealth first to go live in Australia.
Matt Heine, Executive Director of netwealth, said the firm found real competitive advantage by using technology of this kind.
“We think of ourselves as industry leaders in finding new ways to improve the level of service provided to our clients, and we believe this is an excellent demonstration of that.”
Alistair Densley, netwealth’s General Manager of Operations, said the firm had been impressed by the benefits the system offered their clients.
“We were among the first to connect to Calastone to automate our buy and sell transactions last year, and we’ve been very pleased with the results so far” he said.
“Using Calastone’s capabilities to automate our reconciliation process is the logical next step for us”.
The benefits include cost reduction as a result of reducing manual work, reducing reputational risk due to manual errors, timeliness and, most importantly, improving levels of transparency and efficiency to the extent that both regulators and the market are calling for.
“The financial crisis threw all sorts of financial processes into the spotlight and really made the industry focus on being transparent and able to report on their holdings at a moment’s notice,” Ms. Sweeney said.
“These effects are now hitting the Australian fund management industry and fund managers are very keen to look at new systems that allow them to better meet the market’s expectations and international standards.”
Managers can now instantly produce statements of holdings and transactions in one format for all platform providers. Calastone transforms the data to the recipients’ accepted format, so the platform can see it in real time via the Calastone Execution Management System. Previously this information was only available on a monthly basis in multiple manually produced formats.
The Calastone reconciliation system sits between fund registries and the platforms, custodians, SMSFs, wealth platforms and brokers.
In addition to significantly improved visibility of fund holdings, the system also allows for faster and more efficient processing of distributions - another key benefit for end investors