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M&G strikes landmark deal to make funds as easy to trade as shares

by Rachael Revesz on Feb 08, 2013 at 10:58

M&G strikes landmark deal to make funds as easy to trade as shares

M&G is set to become the first fund group in the UK to offer its fund range via electronic settlement on Euroclear’s Crest system, making fund transactions as efficient as buying shares.

The move, reported by New Model Adviser® sister publication Wealth Manager, marks a watershed moment as it could pave the way for other fund groups to make fund dealing in their ranges simpler. It also provides a central counterparty for settlement between funds for the first time, mitigating credit risk.

Until now, UK funds have settled trades manually, making it expensive, time-consuming and open to errors. Documentation is created by mail, while cash instructions can be delayed, missed or sent to an incorrect counterparty.

Mike Deverell, investment manager at Cheshire-based Equilibrium Asset Management, welcomed the move. 'Trading is relatively manual so that's difficult if you're trying to switch from one fund to another, as there are issues of market timing,' he said.

'It's about time this happened and all of the fund groups should get on it. Through Crest, the deal is immediately confirmed and guaranteed, it's all automatic, and you know you're going to get your money.'

The move by M&G follows an agreement with Euroclear, which has worked closely with fund registrars to allow the system to accommodate funds.

As part of this process, fund administrator IFDS has built an electronic link to Crest in order to exchange fund holding details in real time, with daily reconciliations of positions.

The settlement banks that will form part of the service will make and receive payments based on electronic instructions. Should any of them fold, their obligations will be met by the Bank of England, mitigating counterparty credit risk.

Once the funds are registered on Crest, they can be moved between investors almost immediately, allowing for automatic re-registration.

M&G was unable to comment.

4 comments so far. Why not have your say?

Simon West

Feb 08, 2013 at 12:11

Well done M&G, now bring on the others.

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BGM

Feb 08, 2013 at 12:23

M&G was unable to comment

A strange turn of phrase. Were they physically unable, or maybe just unavailable to comment.

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Stanley Kirk

Feb 08, 2013 at 13:38

Electronic trading in funds should and could have been available in the UK 10 years ago - one has to ask the fund managers why they have made it so hard for so long to buy their product. This will be a major boost to the efficiency of platforms - well done M&G for breaking this particular dam to greater efficiency.

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Charles Chami

Feb 08, 2013 at 17:10

Agreed, thumbs up to M&G, any move that makes accessing funds easier and cheaper should be welcomed!

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