The transfer agency landscape continues to evolve. At our latest Luxembourg TA Forum, we focused particularly on alternative assets – a topic that generated significant interest from the TA community and some of our most detailed discussions to date.
As alternative and semi-liquid strategies become a more prominent part of the funds landscape, transfer agents are being asked to support a broader range of fund structures and increasingly varied operational requirements. At the same time, the industry’s existing priorities have not gone away. Automation, transfers, account opening and AML/KYC remain firmly on the agenda, while preparations for shorter settlement cycles and the emergence of technologies such as AI are creating new considerations.
What became clear from our latest discussion is that these trends are closely connected. As the fund universe becomes more diverse, TAs are looking at how automation can support increasingly varied and complex operational requirements.
Alternative assets bring different operational requirements
Alternative and semi-liquid funds can introduce operational characteristics that differ significantly from those associated with traditional daily-dealing mutual funds.
Liquidity is a good example. Periodic dealing, notice periods, lock-ups and redemption gates can all form part of the mechanics of these structures. For transfer agents, this creates additional considerations around how transactions are processed, tracked and communicated.
Gating generated particularly detailed discussion at our latest forum. If an investor submits a redemption request and only part of it can be fulfilled, what happens to the remainder? Does the residual instruction automatically roll over into the next dealing period, or is another instruction required? How are new redemption requests treated in the meantime? And at what stage should each participant be informed?
These questions become more complex because different funds can approach the process differently. Our discussion explored different potential models for dealing with residual instructions, as well as considerations around valuation points, lock-ups and charges.
Perhaps the most interesting point is that processes such as gating have historically often been considered exceptional – something that might become relevant during a period of significant market stress. For some semi-liquid structures, however, liquidity-management mechanisms can be an inherent feature of the fund. That means the processes surrounding them need to be capable of operating efficiently as part of the normal fund lifecycle.
Turning complex processes into automated workflows
For TAs, this raises a wider question around automation.
The industry has made considerable progress in automating traditional subscriptions and redemptions. But automation becomes more challenging when a transaction can move through several different states before it is finally completed.
A gated redemption is a good example. An instruction might be received and acknowledged before a decision is made about how much can be processed. Part of the transaction may then be fulfilled, while the remainder could need to be carried forward. Each stage can create information that needs to be communicated between the asset manager, TA and distributor.
Automating this type of process therefore involves more than simply transmitting the original order electronically. The workflow needs to be able to accommodate the mechanics of the fund, different transaction states and the information associated with them.
This was one of the most interesting aspects of our forum discussion. As alternative and semi-liquid funds become more established, processes that may previously have been handled as exceptions will increasingly need to be supported efficiently at greater scale.
The fundamentals of automation still matter
While alternative assets were the focus of our latest forum, some familiar subjects remain high on the TA agenda.
Transfers and account opening continue to be important areas for automation, alongside the AML and KYC processes associated with onboarding investors. These are areas where manual intervention can still form part of the operating model, even as traditional order routing has become increasingly automated.
They also matter when considering the growth of more complex fund structures. Additional investor, documentation and onboarding requirements can increase the operational workload surrounding a fund before an investment has even been made.
The opportunity is therefore broader than automating individual transactions. It is about continuing to remove manual intervention across the investor lifecycle, from account opening and onboarding through to dealing, transfers and ongoing servicing.
For TAs, this work is complementary to supporting new fund structures. Innovation in funds themselves needs to be accompanied by continued evolution in the processes through which they are distributed and serviced.
Preparing for shorter settlement cycles
This evolution is taking place against another significant industry change: the move towards T+1 settlement.
While mutual funds themselves are not immediately in scope, they operate within a wider market ecosystem that is moving towards faster settlement. As underlying securities increasingly settle on T+1 while fund subscriptions and redemptions may continue to settle over longer timeframes, the resulting timing mismatch can create additional liquidity and funding considerations.
Shorter settlement cycles also reduce the amount of time available to identify and resolve operational issues. Manual reconciliations, fragmented settlement instructions and limited visibility of cash positions become harder to accommodate when the window for intervention becomes smaller.
For transfer agents, this reinforces the importance of continuing to automate processes throughout the transaction lifecycle. Earlier visibility, efficient processing and fewer manual touchpoints become increasingly valuable as settlement timelines contract.
It is another example of how changes elsewhere in the investment ecosystem can ultimately feed through into the TA operating model.
AI and the next phase of TA automation
Technology is also creating new possibilities for how that operating model might evolve.
AI has become an increasingly prominent topic within our TA discussions, and the development of AI agents is particularly interesting. As operational processes become more complex, there is potential for these technologies to support teams in navigating information, identifying exceptions and coordinating activities across workflows.
This is still an evolving area, and the precise applications will develop over time. But it points towards an interesting next stage in the industry’s automation journey.
For many years, automation has focused on digitising individual processes and replacing manual instructions with electronic ones. AI agents could potentially build on that progress by helping firms manage some of the information, exceptions and activities that sit around those automated processes.
That does not diminish the importance of the automation work already taking place. Rather, AI could become another tool available to TAs as they look to make increasingly complex operating environments more efficient.
Supporting a broader funds landscape
What I took away most strongly from our latest forum was the breadth of change transfer agents are now managing.
Traditional mutual funds remain at the heart of the industry, but TAs are increasingly supporting a wider spectrum of fund structures and strategies. At the same time, they are continuing to automate established processes, preparing for shorter settlement cycles and considering how emerging technologies could reshape their businesses.
The detailed discussion around alternative assets demonstrates how actively the TA community is working through this evolution. Questions around how a partially gated redemption should be processed, tracked and communicated may appear highly technical, but they illustrate a much broader shift.
As fund structures evolve, the processes supporting them need to evolve too. The opportunity is to continue extending automation into areas that remain complex or manual today, giving TAs the flexibility to support an increasingly diverse funds landscape efficiently and at scale.
