DTCC and Citi launch managed accounts service

Source: Depository Trust & Clearing Corporation (DTCC)

The Depository Trust & Clearing Corporation (DTCC) today announced plans to introduce a new service to centralize and streamline the processing of managed accounts.

Citigroup Smith Barney's Consulting Group and Global Transaction Services, a business unit of Citigroup Corporate and Investment Banking, will partner with DTCC to launch the service, which is open to the full managed accounts industry.

Managed accounts have grown dramatically in recent years, with assets under management currently estimated at $740 billion, compared to $678 billion at the end of 2005. The industry is projected to reach $1.5 trillion by 2011, spurred by an increasing number of high-net-worth households and a wave of baby boomers facing retirement who want customized investments and tax-sensitive portfolio management.

Citigroup Smith Barney's Consulting Group is the largest sponsor of managed accounts with nearly 30 percent of the market and an estimated $200 billion in assets under management. Global Transaction Services is a leading provider of operations services to investment managers responsible for more than $120 billion in separately managed accounts assets. The communication gateway will be offered through DTCC Solutions LLC, a subsidiary of DTCC.

"We are extremely pleased that the leading managed account sponsor and outsourcer have agreed to pilot this service with us," said Ann Bergin, managing director and general manager, DTCC Distribution Services. "The combination of Citigroup's leadership position in this market, coupled with our operational capabilities and infrastructure, will bring an unprecedented level of efficiency to this growing segment."

Partnership focus: premier client service

"Ultimately this is about growing the managed accounts industry and helping investors reach their goals," said Paul Hatch, managing director of Smith Barney's Consulting Group. "This service will enable Citigroup to leverage its leadership position as sponsor and outsourcer to help the industry deliver the full potential of managed accounts while eliminating industry inefficiencies that seize the manager’s focus at the expense of customization and premier client service."

"Our strategic partnership with DTCC solves an intractable problem associated with delivering efficient processing of separately managed accounts," said Neeraj Sahai, managing director and global head of Securities and Fund Services for Citigroup Corporate and Investment Banking. "With Global Transaction Services' translation platform, Smith Barney will be able to support industry standards for communicating account information through DTCC's gateway, without costly reconfiguration of existing systems."

"DTCC has a proven track record of delivering innovative solutions that have become the operational standards in other financial services markets," Bergin said. "Our managed accounts service will provide the solid infrastructure and connectivity that will help the industry grow, through a network that is proven to be resilient, safe and secure."

Background: How the service will work for the industry

Managed accounts encompass a variety of financial instruments designed for high-net-worth investors that include separately managed accounts, multi-style portfolios and unified managed accounts, among others. Unlike mutual funds, where investors have an interest in a large pool of securities, a managed account holds the securities of just one investor. Investment managers offer individualized service and customized strategies tailored to the specific goals and needs of that investor.

DTCC's managed account service will automate the process of opening new accounts as well as streamline the flow of information required to maintain various types of managed accounts – a process that is now highly manual – and increase efficiencies while reducing errors and operational risks.

The service will link managed account sponsors, investment managers and service providers, streamlining the multiple connections and disparate processes that now exist between parties. It will standardize the format and communication of critical information necessary to facilitate the account opening and maintenance of a broad variety of managed account products, including separately managed accounts, multi-style portfolios and unified managed accounts, through a single gateway.

DTCC's managed account service is built with open architecture and message standards endorsed by industry leaders and the Money Management Institute. Standardized messages seamlessly flow through a central platform for account set-up, maintenance and reporting. The hub serves as a conduit for messages to be submitted, acknowledged, accepted or rejected.

The initial phase of the service will include messages with all the data points required to establish a new account. Account maintenance functions like the addition or subtraction of assets from an account and account termination notifications will also be available. Client profile updates can be made using standard messages to change a client's investment strategy, distributions or dozens of other changes. The second phase of the service will include messages to automate changes in restrictions, custodians, investment manager style, account fees and tax harvest requests.

The service is open to all industry participants, and can be accessed via the Internet or an existing DTCC secure connection. Messages are transmitted using XML, a highly recognized and flexible messaging format that can be used by a broad range of participants. Optional sponsor translation services will be available through Citigroup GTS.

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