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    In Part 1 of our Global Transfer Agency (TA) series, we examined the opportunities and challenges of the current TA model such as fee compression, economies of scale, outsourcing, automation and regulatory restrictions.

    In Part 2 of our series, we will investigate future trends in TA and how the challenges of the current model can be used to create opportunities through an agile and globally digitised offering.

    Global & Agile: The Asian Example

    As most manufactured products, funds benefit from economies of scale when fixed costs can be spread across a larger asset base. The European Union (EU) forged a path in facilitating the distribution of funds across multiple countries with the Undertakings for the Collective Investment in Transferable Securities (UCITS) framework. The UCITS framework has allowed asset managers to use their Luxembourg or Irish domiciled funds to collect assets all over the world, creating large funds with a large distribution footprint.

    Asia was generating enormous interest from asset managers prior to the COVID-19 pandemic. At that time, the region was projected to overtake the rest of the world on purchasing power parity terms by as soon as 2020.1

    Oliver Wyman found personal investment assets in China alone increased in size from USD11 trillion in 2012 to USD22 trillion in 2017, and had forecast that this would reach USD37 trillion within the next five years.2

    UCITS have successfully accumulated a significant amount of assets in APAC, principally in Hong Kong, Singapore and Taiwan. As a result, first generation Global TAs offered “Asian Service Desks” to close the gap between the domicile of Asian shareholders and UCITS fund domiciles. Conceptually, Asian Service Desks provide in-region support to Asian shareholders so that shareholders subscribing to UCITS funds can be serviced in their own time-zone and by TA staff speaking their native language.

    The success of cross-border funds and the expected growth in wealth has prompted the region to develop its own passporting regimes designed to optimise cross-border distribution processes for local asset managers. The ASEAN Collective Investment Scheme (CIS), which went live in 2014, comprises of Malaysia, Singapore and Thailand, but it has yet to obtain scalability despite well-intentioned efforts to broaden the scope of eligible funds. More recently, the Asia Region Funds Passport (ARFP) launched, covering Australia, Japan, South Korea, New Zealand and Thailand.

    As new cross-border passporting regulations are coming into play in Asia, next generation Global TAs need to further enhance their models to ensure that asset managers are receiving the necessary support to thrive in the future. These Global TAs should look to combine the service offerings of different fund domiciles into a single, homogenous provision of services. By doing so, they will allow the asset manager to select the most appropriate fund vehicle (whatever its domicile) for distribution in any given country. It is then left to the TA to ensure that both the shareholder and asset manager experience is consistent across any number of fund domiciles.

    China should not be forgotten when focusing on the APAC region, as analysis performed by IMF indicates that the global recovery after COVID-19 could be led by China. The country’s GDP contracted by 6.8 per cent during the January to March period of 2020, but as the first to emerge from lockdown, the country bounced back into growth in the second quarter.3 The growth of 3.2 per cent was the weakest expansion on record and there are still challenges ahead, but the fundamentals that were driving Asia’s emergence as a financial powerhouse are still in place. The region represents a huge opportunity for asset managers, and one that TAs must respond to. A Global TA model which includes a country like China, would allow international shareholders to subscribe to Chinese funds and Chinese investors into international funds. This is already perfectly feasible for through Mutual Recognition of Funds (MRF) Hong Kong domiciled funds, but regulations currently do not allow for direct access to mainland China funds and shareholders to be included into the model as of yet. A nimble Global TA model allows for the asset manager to tap into these opportunities as soon as they become available.

    Source: Financial Times, IMF

    As the APAC region and other emerging markets continue to liberalise and emerge from COVID-19, asset managers will need a service offering that is both local and global. The TA of the future will combine valuable local knowledge with a multi-jurisdictional, comprehensive service package to better ensure that asset managers with a global reach can be supported in their distribution strategies.

    Bespoke efficiency

    As more client information becomes digitised, the investor on-boarding process for TAs will be significantly streamlined. In fact, developments at an EU level - namely the Digital Single Market Initiative – are likely to accelerate this. The Electronic Identification, Authentication and Trust Services (eIDAS) Regulation was introduced in 2018 and enables EU citizens to use their electronic IDs (eIDs) such as driving licenses or identity cards to access online services across the EU.4 As a result, an EU resident is now able to open up a bank account in a different EU market without having to be physically present, as was the norm under previous anti-money laundering (AML) compliance rules.5

    As more client information becomes digitised, the investor on-boarding process for TAs will be significantly streamlined.

    Estonia, rated #1 for entrepreneurial activity by the World Economic Forum, 2017, is leading the way on this topic. Estonia has established e-residency since 2014. Named “the world's most digitally advanced society”, Estonia has built a full set of government services using blockchain technology. As of today, 99 per cent of Estonian residents have an eID of which 67 per cent use it day-to-day. A total of 2773 services can be accessed digitally, with 99 per cent state services on-line.6

    If eIDs come into increasing use, it is possible that regulators could insist that only investors with verifiable eIDs issued by an EU government (or a third country with equivalent AML standards) will be permitted to enter a fund, thereby simplifying the AML and know your customer (KYC) process. This would facilitate greater automation of KYC for TAs, which in turn could materially improve user experiences when procuring mutual fund units, facilitating instant and hassle-free execution of their orders. However, the Estonia example shows there is still more work to be done to ensure government issued eIDs actually do guarantee adequate KYC/AML verification as Estonia’s Crypto Crackdown has demonstrated.7

    TAs are guardians of a significant amount of client data and this is likely to be instrumental in their new service proposition in the future. Since the passage of the Markets in Financial Instruments Directive 2 (MiFID II) in 2018, TAs have shared shareholder information with managers and distributors, supporting them with their compliance requirements around product governance. Some TAs are already experimenting with advances in data analysis and artificial intelligence (AI) to disseminate more granular data on market trends and provide specific insights to managers. This, in turn, will help managers to develop highly customised investment products based on the bespoke needs or general characteristics of their underlying clients or prospects. Again, this will rationalise the entire distribution process for fund managers.

    The rise of tech firms: The end of TA as we know it?

    The funds’ industry could be completely revolutionised over the next decade as new market entrants become increasingly influential. While technology giants such as Google, Amazon, and Apple have not rolled out distribution or investment management solutions yet, this may not stay the case for long. China’s tech companies are widely seen to be leading the charge in this area. The country’s Alipay platform lets Alibaba’s online shoppers put their spare change into the company’s flagship money market fund – Yu’e Bao – which now oversees more than USD168 billion in assets.8 Having seen events unfurl in China, Silicon Valley giants may be enticed into giving asset management or fund distribution a try.

    While Generation X are relaxed about relying on traditional independent financial advisers (IFAs), wealth advisers or brokers for investment advice, millennials are more open to engaging with big technology companies on financial matters. A study by Calastone, the funds’ transaction network, found 50 per cent of millennials would buy investment products from a technology company such as Google and 42 per cent were comfortable doing so from online retailers.9 As customer buying habits migrate online, TAs will need to change their business models so that subscriptions and redemptions are fully digitised and much expedited. Digital on-boarding, on-line payments and real-time tracking of subscriptions and redemptions are already made available to most shareholders, but in most cases it still takes days to finalise an initial subscription into a fund. As technology provides more streamlined, real-time solutions, TA’s will need to be flexible enough to leverage the digital environment to offer these benefits to the investor.


    The TA model – as it stands – will be vastly different in five to ten years’ time. As its core products become commoditised, TAs will need to leverage their data allowing managers to better target investment products at underlying investors. With distributors also becoming increasingly global, TAs will have to enhance their geographical footprint, and support clients across more domiciles. While the industry is facing its own unique challenges, TAs need to rise to the occasion and identify new business models to meet future demands.

    Steven Caluwaerts, Director GDTA Product, Securities Services, HSBC

    1World Economic Forum (July 25, 2019) In 2020, Asian economies will become larger than the rest of the world combined – here’s how
    2Reuters (March 7, 2019) China tightens rules on wealth management boosting prospects for foreign banks
    3World Economic Forum (July 16, 2020) China’s economy has rebounded after a steep slump – but challenges lie ahead
    4 EC (September 28, 2018) Cross-border digital identification for EU countries: Major step for a trusted digital single market
    5 EC (September 28, 2018) Cross-border digital identification for EU countries: Major step for a trusted digital single market
    6Statistics obtained from (June 19, 2020) Setting It Straight: Estonia’s Crypto Crackdown Weeds Out Bad AML/KYC
    8 Financial Times (January 28, 2019) Ant Financial’s money market fund shrinks to 2 year low
    9 Calastone (June 18, 2019) Millennials and Investing

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