Japan Wealth Management Securities, Inc. (JWM), a Japanese fund distributor, has become the first Japanese customer of Clearstream’s Central Facility for Funds (CFF), the innovative solution launched last year to streamline the post trade processes in the cross border investment funds industry.
In joining CFF, JWM will link directly to the Luxembourg based transfer agents in an efficient and cost effective way. CFF offers a Straight through processing (STP) solution for settlement and custody processes in an industry still characterized by lack of standardization, high levels of manual processing for order trading and the requirement to interface with multiple parties. It has 31 members and offers access to more than 24,000 fund classes one year after its full launch in September 2007.
CFF’s business and operating model was designed primarily for investment funds domiciled in Luxembourg, the largest market in Europe for international funds with close to € 2000 billion in assets under management. It has also proven attractive to other funds domiciles such as Belgium, Ireland, Switzerland and the UK.
“We are proud to welcome Japan Wealth Management Securities, Inc. in CFF said Philippe Seyll, Head of Clearstream’s Investment Funds business. This agreement demonstrates that Clearstream’s innovative and efficient solutions to streamline the investment funds industry post trade processes are not limited to Europe.
CFF offers all participating firms (transfer agents, fund distributors and fund promoters) one single and consistent settlement framework for all eligible funds, which accelerates and simplifies operational processes, as well as reduces risks. CFF provides post trade services only, with an architecture open to the various order execution processes and is fully integrated with Clearstream’s existing custody and settlement services. This enables customers to benefit from the CFF service while keeping the advantages of the full integration of their holdings in investment fund shares with those in other asset classes. CFF does not change the direct relationship between distributors and transfer agents and it does not provide direct access for retail customers or independent financial advisors (IFA).
Clearstream designed CFF as an answer to growing market demand in Europe and in Luxembourg. Although the industry has grown 80 percent since 2005, its post trade area is still characterized by high fragmentation, little standardization and thus operational risk. According to a study by Deloitte, the cross border investment funds industry could save at least 30 percent of processing costs and gain over € 300 million by streamlining trading, settlement and custody of cross border mutual funds.
