Money Market Services Q&A with Brian Duffy, Product Development, on how liquidity fund managers’ distribution is being transformed______

Brian Duffy, Product Manager, Calastone

How did the idea for Money Market Services come about?

The simple answer is client demand. Our success in automating the mutual funds industry’s trade, settlement and reporting processes led a major client to approach us and ask if we could automate their liquidity business and provide integrated investment data to their underlying investors. They cited, in particular, a desire to leverage our expertise in providing full oversight and an automated end-to-end user experience.

We realised this was talking to our strengths. As the leading global mutual fund network connecting more than 2,700 clients in 47 countries, we have a proven track record in connecting firms to their trading partners – often in days and without the need for an infrastructure project. Not only did we realise we were well placed to enable the liquidity industry to automate but the ensuing conversations made evident the scale of the improvements we could bring to the liquidity fund distribution lifecycle.

What we found when we investigated in depth was that the level of integration across the liquidity funds industry was low. That was not all. The flow of information was error-prone and subject to regular delays. There was a lack of visibility over the trades, an absence of reporting or regular reconciliation and uncertainty throughout the payment process.

Since those conversations, we have built a number of solutions for our liquidity fund clients, enabling full automation of the orders and real-time investor reporting.

So how does it work?

We designed Calastone Money Market Services to enhance fund managers’ distribution processes by enabling direct connectivity with their investors. What this means is the removal of unnecessary intermediaries in the distribution chain, while providing greater fund accessibility for investors, all in a fully automated trading environment.

Fund managers can now digitalise and accelerate the entire liquidity fund trading lifecycle via a single connection to Calastone. This works from the initial trade placement through to the settlement, enabling real-time position and transaction reporting directly into the investors’ systems. We also provide automated rates and yield information from the fund directly to the investor.

Fund managers are also able to distribute their fund to any of their investors regardless of connectivity method, creating a smoother and faster onboarding process. Once the fund manager is up and running on our network, investors can be onboarded as and when they want to start trading with the fund.

What benefits are fund managers seeing?

The main benefits come from the direct connectivity. Firstly, it makes their funds more accessible through greater speed to market, with connectivity for investors taking just days rather than months to onboard, enhancing inflows. At Calastone we accept all formats, connectivity methods and bespoke integrations. One connection to us connects the fund manager to all the leading portals and treasury systems worldwide so they can make their funds even more accessible.

By enabling fund managers to optimise their distribution process, they can position their fund range with investors in the way that they choose. In a world where the investor wants more control and flexibility this digital solution gives fund providers another way to create stickier relationships and secure more inflows.

Fund managers can also support their investors more effectively with the real-time trade, settlement and reporting processes, ensuring greater control over their investments, in a fully streamlined digital environment.

Lastly, fund managers also see reduced costs, with the risks of manual processes such as fax and telephone entirely removed.

How can it be implemented by fund managers?

We have a specialist onboarding team that guides fund managers through the process, from user acceptance testing to go-live. We discuss the formats and connectivity channels with the fund and from there we get them up and running. Best of all, we can do this in a few days, depending on the choice of integration. It is precisely this simplicity that has helped us establish a name for ourselves with the global asset management industry.

The fund managers only need to test once and don’t need to test each time a new investor is onboarded. New investors go through their own fast process with us, enhancing speed to market for the fund.

What sort of ongoing support is offered to fund managers?

Our Operations Team supports clients 24h x 5.5 days a week, ensuring seamless continuity in the ability to trade, route and settle at any time. Business continuity is underpinned by state-of-the-art network capacity management, allowing us to anticipate any issues, ensuring clients experience zero downtime.

How will the landscape for Money Market Services develop in the future?

Low interest rates and further regulation means that liquidity funds are struggling to maintain their competitiveness. However, global money market funds are key liquidity players in the financial industry. We therefore see a sustained appetite for our clients to open up and digitalise their money market activities.

We also see scope for further progress in automating the functions related to issuance and transfer agency. Further in the future, we are looking at tokenisation and uses of smart contracts around liquidity funds, offering a potential way into more bespoke liquidity investment vehicles for institutional clients.

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