Dan Kramer, Vice Chair at Calastone, is a veteran of the global asset management and fund administration industries. In this Q&A Dan shares with us some of his insights into how the DMI is evolving to transform and digitalise the fund administration ecosystem. With DMI Fund Services, what is now possible and what change is there on the horizon?
How did the idea for DMI Fund Services come about? Why is fund administration the core focus?
The Calastone network and our order routing technology has significantly simplified funds processing across the globe, reducing cost, time and risk. We then asked the question – why can’t every aspect of a fund’s lifecycle also be automated?
There are many areas of friction that remain which are addressable through the right application of technology and our network. This realisation has led us to focus our DMI platform toward transforming and automating the entire fund value chain.
By leveraging the latest approaches to system architecture and technologies like cloud and distributed ledger, we are introducing DMI Fund Services, which uniquely enables us to provide solutions to optimise current processes and create innovative new solutions. We are starting with fund administration, specifically Transfer Agency, and will reduce cost and provide a better service for the fund community and its investors.
How does it leverage the Calastone network?
Our network is the largest of its kind in the world with over 2,500 participants, enabling 25,000 trading links across 46 markets. We saw the opportunity to leverage this global ecosystem to create real-time applications to help transform fund administration. With fund information readily and uniquely available on the network, traditionally labour intensive processes such as reconciliations are significantly reduced and the Transfer Agent can replace reporting with more powerful permissioned access to their digital register, with any and all counterparties.
We’ve seen that there are many organisations trying to build DLT-based solutions to help solve some of these issues, but we are completely unique in the breadth of our capability to enable an end-to-end solution and also because of our existing connectivity and integration with the market. The ledger is already available, enabling Transfer Agents to transform and streamline in a timeframe that is suitable to their needs.
What does it mean for the future of Transfer Agency?
TAs play one the of the most critically important roles within the industry, ensuring that the information held about their clients’ investor holdings are accurate at all times. However, they are challenged by the significant complexity and fragmentation of the market. DMI Fund Services for Fund Administration arms and empowers the TAs by immediately gaining the benefits of a fully digital model, eliminating the most frictional elements of their businesses. Thanks to the componentised nature of the solution, TAs can migrate to our administration platform completely or simply consume the services they want alongside their existing solution.
Since most of a participants’ transactions are already reflected on the DMI, and it is straightforward to reflect ‘non-Calastone’ transactions, a real time register can be easily completed. Records will be reflected in real time, significantly reducing breaks and therefore reconciliations, and reporting can be facilitated by providing real time access to counterparties. The total cost of ownership is transformed and associated systemic risk is mitigated. In short, they will be more agile and better placed to address the changing needs of their clients and ultimately create a more robust experience for the end investor.
How will this impact the future direction of the whole funds industry?
Having worked in fund administration for over twenty years, I saw the ways in which cost and efficiency concerns held the industry back, preventing modernisation where it was required. This had a knock-on effect on the entire funds industry because the inherent infrastructure on which the industry operates on hasn’t provided the flexibility needed to support changing investment models.
DMI Fund Services has the power to change that. When you add the underlying fund assets to this new infrastructure, issuance of tokenised investment vehicles, for example, is made possible. The wider goals of the funds industry of delivering sustainable, low cost and bespoke solutions is only possible with an industry built upon a fully digital infrastructure with the speed and capability of DMI Fund Services.
What impact will DMI Fund Services have on the end investor and in what ways could it transform the way in which people invest?
We are already seeing the advent of completely new investment models, with some new entrants providing the opportunity for new communities of investors with smaller asset bases. This is an important next step for the funds industry as it will encourage and facilitate significant new inflows of investment into funds.
With the lower costs that DMI Fund Services delivers for the industry, this builds the opportunity for the industry to create more accessible solutions to a wider range of investors. It also enables more bespoke investment products and highly customised investment vehicles, at a low cost. Tokenisation is one investment model that could be enabled, which would completely transform the way in which people invest.
What is the implementation roadmap looking like for DMI Fund Services? How will it be adopted?
DMI Fund Services is built to include many new services and applications, so clients can immediately support their business today in a way that they choose and it can be adopted through a migration that works at a speed that’s right for them. So whether a client is looking to completely refresh their entire technology stack and move to our full transfer agency application or to automate and digitalise specific components, DMI Fund Services can accommodate.
How will DMI Fund Services evolve in the future? Can we expect to see new applications across different areas of funds?
Over the course of 2021, we will be expanding the capabilities of DMI Fund Services beyond fund administration. By the end of the year, we will have solutions in place for both fund managers and fund administrators. What this means is that the entire fund market will be completely digital, end-to-end. We have the technology to make this a reality and will be keeping our clients and the wider industry informed every step of the way as we build out these new solutions.