The European investment funds industry could cut processing costs by 25% and gain over EUR250 million by streamlining trading, settlement and custody of cross border mutual funds distribution, according to a study conducted by Deloitte and released by securities depository Clearstream.
Furthermore, with Basel II standards coming into effect in 2008, industry participants such as transfer agents and distributors would also save around 20% of regulatory capital required to run their business if mutual fund processes were automated and streamlined, says Clearstream.
The research focused on cross border mutual fund distribution in Luxembourg and Ireland - Europe's two major markets.
The mutual fund industry curently uses different models - transfer agents in Luxembourg and Dublin, central securities depositories in France and Germany or mixed models. But the Deloitte study found that all models currently involve a significant amount of manual processing in order trading.
There is no standardised trading system, says the report, so interfaces have to be maintained with a number of parties. Furthermore, payments of subscriptions and redemptions are processed via different channels with various risk components and a multiplication of intermediaries.
Philippe Seyll, head of investment funds services at Clearstream, says: "This study, for the first time, quantifies efficiency gains through streamlined processes of cross border investment funds."