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Going the last mile with funds industry automation

Going the last mile with funds industry automation

16 June 2015

In the spirit of collaborating to eliminate remaining pockets of manual processing in the funds industry, Allianz Global Investors is working with SWIFT to encourage distributors and fund managers to connect using Alliance Lite2.


During recent years, the funds industry has made great progress with automation. There is widespread recognition that automated processes, underpinned by the use of standardised message formats, are essential to reduce cost, minimise risk and maximise operational efficiency in the funds business.

Ongoing analysis by SWIFT and the European Fund and Asset Management Association (EFAMA) - which focuses on the cross-border fund centres of Ireland and Luxembourg - reveals a steady increase in levels of automation and standardisation of fund orders. The EFAMA study shows that in the last quarter of 2014, the total automation rate of processed orders of cross-border funds reached 82.6%, and the use of ISO messaging standards rose by 4.5 percentage points.

Impressive though this progress towards standardisation and automation is, there remains plenty of room for improvement. Strengthening efficiency by eliminating costly, risk-prone manual processes is vital if funds players are to live up to the requirements of the regulators, operate profitably and, crucially, deliver the best possible service to end investors.

Closing the gaps

In addition, standardised and automated communications need to reach all corners of the community. Any pockets of manual activity that remain can jeopardise the risk and cost management benefits of automation that has already been achieved. Ongoing manual effort leads to errors, disputes due to the lack of an audit trail, rising costs generated by the need to maintain multiple communication channels (fax, email, ftp et cetera) and a lack of scalability, all of which undermine operational efficiency.

It is therefore in the interests of funds players that have embraced standardised, automated processing themselves to focus on increasing the uptake of automation by their counterparties. Only by bringing all players in the chain up to the same levels of operational efficiency will the full value of automation be achieved by the industry, to the ultimate benefit of the investor.

SWIFT's role

SWIFT has been supporting the funds industry in achieving its automation goals for a number of years. SWIFT's standardised messages for the funds industry cover all the business flows (account openings and maintenance, orders, statuses and cancellations of orders and order confirmations, transfers, statements of holding and transactions, reporting on price and cash flow) required to automate the processes carried out between funds distribution players - investors and their intermediaries, distributors, distribution platforms, fund management companies, transfer agents/registrars, fund accounting agents, trustees, custodians and portfolio managers.

Since 2012, SWIFT's Alliance Lite2 - a cost-effective, cloud-based connectivity solution - has made it easy and affordable for funds players of all sizes and volumes to take advantage of SWIFT's standardised funds messages, while at the same time connecting to a network via which they can communicate securely with any of their counterparties.

In addition, once connected to SWIFT using Alliance Lite2, firms can re-use their SWIFT infrastructure to automate other key processes, such as securities clearing and settlement, corporate actions processing and payments. Clients can for example receive a variety of information from their different counterparts, ranging from daily cash and depot account statements to status of individual transactions and real-time cash management to name just a few.

Alliance Lite2 makes SWIFT-based automation of funds flows accessible to many of the players for whom the barriers to automating may previously have been too high. SWIFT is pleased to be working with a number of customers to use Alliance Lite2 to further extend the benefits of standardisation and automation to these participants - helping to close off remaining pockets of manual activity and take industry-wide operational efficiency to the next level.

Spreading the word

One such player is Allianz Global Investors, which is working with SWIFT to encourage the distributors and fund managers in its network that are not already on SWIFT to connect using Alliance Lite2 in order to automate their funds communications with Allianz Global Investors. The firm's aim is to increase its own levels of operational efficiency by replacing manual links with its counterparties with standardised, automated communication over SWIFT, and also to enable its distributors and fund managers in turn to benefit from automation in their own operations. When they connect to SWIFT using Alliance Lite2 in order to communicate with Allianz Global Investors, they also have the potential to use SWIFT for communication with all their other counterparties. "Risk management, cost control and customer service all improve as a result of automating funds processing," says Michael Weber, Head of Mutual Fund Distribution Operations, Allianz Global Investors

Alliance Lite2 is easy to implement, cost effective to run and brings tangible efficiency benefits very quickly. We have already seen one of our counterparties move to Alliance Lite2 as a result of our joint approach with SWIFT, and I look forward to bringing on board many more of our counterparties.

— Michael Weber, Head of Mutual Fund Distribution Operations, Allianz Global Investors

Weber believes that Alliance Lite2 is the ideal connectivity solution for funds distributors and managers that are new to SWIFT. "It is easy to implement, cost effective to run and brings tangible efficiency benefits very quickly. It is also reusable for communications with other counterparties and increases the transparency which is high on the agenda of any of our counterparts. We have already seen one of our counterparties move to Alliance Lite2 as a result of our joint approach with SWIFT, and I look forward to bringing on board many more of our counterparties in the near future."

Olivier Lens, Head of Funds & Investment Managers, EMEA, SWIFT, says the model of major players working with SWIFT to encourage wider uptake of automated funds processing is a very powerful one. "Gaps in industry automation have a major impact on operational efficiency, creating unnecessary cost and risk and ultimately depriving end investors of the best outcome."

"Alliance Lite2 opens up the use of standardised messaging for funds flows to players of all sizes, and approaches like that being taken by Allianz Global Investors are really valuable to encourage the inclusion of as many funds players in industry automation efforts as possible," adds Mathias Schotte, Senior Sales Manager of Funds & Investment Management, CEE at SWIFT. "We are delighted to be working with Allianz Global Investors, and we look forward to extending the benefits of secure, standardised funds messaging to as many of its network of counterparties as possible."