The value of having a one-stop shop in post-trading for institutional investors

A well-established trend which is becoming wholly dominant on the Italian market. The last ten years have seen assets distributed by foreign asset managers rise from negligible amounts (less than 5% in 2003) to more than 40% of total assets. Moreover, if we include foreign funds promoted by Italian asset managers, the percentage of foreign funds rises to 80%.

This sharp upturn is just one of the factors that make it complex from an operational viewpoint to make the offer for each type of investor and distributors more efficient.

“The more complicated the environment, the greater the need for operators to have simple and streamlined administrative, back- and middle-office processes” says Marco Mosca, Head of Coverage, Marketing and Solutions at  Societe Generale Securities Services in Italy. “Operational due diligence is increasingly connected to investment due diligence, to create efficiency with the aim of constantly improving final returns. On the one hand, because, in an environment in which rates remain at their lows, every basis point counts, and, on the other, automation allows resources to be freed up for the investment specialist core activity, i.e. asset allocation and the choice of tools through which to build market exposure”, he adds.

The rise in foreign funds and the asset servicer’s role

In 2021, foreign funds raised almost €60 billion, an overwhelming market share considering that Italian funds did not amount to €6 billion in the same time frame.

Institutional investors are the main consumers of foreign funds. According to Assogestioni data, around 90% of mutual funds included in the pension fund portfolio is domiciled abroad, a percentage that for insurance companies comes in slightly lower, at 87%.

The institutional channel is flanked by the retail channel, reached through consulting networks, and the wholesale channel. The latter has grown significantly over the years, and now accounts for around 11% of total foreign fund assets.

Investors with complex and varied needs, says Marco Mosca, who share the need to identify economically and operationally efficient methods for all activities related to the supply and management of foreign funds, integrating everything into the company’s overall business.

“Today, a one-stop shop solution that can offer a truly complete service to investors must cover everything from custody to correspondent banking, including settlement, order transmission and reporting”, he says.

“In 2021”, he explained, “we perfected the partnership with MFEX (which in September joined the Euroclear Group, taking the new name of MFEX by EUROCLEAR) to incorporate every aspect of funds distribution into our offer, starting from the strategic decision to target the creation of a complete set of services allowing every institutional investor, regardless of nature and size, to find everything they need in one place”.

Following the operation, through a single-entry point, investors will have access to more than 950 asset managers managing more than 90,000 funds and will be able to manage real-time updates on transactions, transfers, cash flows and operations, as well as, among other features, access to solutions for integrated data analysis and usability through structured and customised dashboards as well as digital compliance services.

“There are very concrete advantages to a holistic and unitary approach”, the expert adds, “also in terms of understanding client needs, data analysis and reporting. These aspects are particularly visible if we take as an example the case of a bank that has to buy foreign funds for its consulting network and also for asset management, for which the need to hold securities goes hand in hand with the need to use mutual funds. Having built an offer that enables dialogue on every aspect of asset servicing creates a real partnership with the client. In this way, we are able to offer simplification, efficiency and client experience. But the added value increases if we consider that through client-provider integration, our one-stop shop allows us to seize the best market opportunities according to a time to market approach".

Article published in FocusRisparmio, on March 25, 2022.