Aberdeen has joined M&G in confirming it will use Euroclear's Crest system, with 19 other fund groups administered by the IFDS set to follow in a move which will significantly bring down costs for distributors and fund groups.
Wealth Manager last week revealed that M&G will be the first group to settle on Crest, which is scheduled to start in March. This paves the way for fund groups using the third party administrator IFDS Group, including Aberdeen and Invesco Perpetual, to follow suit.
The 21 fund managers represent around 80% of the entire IFDS community, with the IFDS Group being the largest third party administrator to the UK funds industry.
Aberdeen Asset Management confirmed it will use Crest, and will likely go live in the second quarter.
Andy Rudd, product manager at Euroclear UK and Ireland, told Wealth Manager: 'We are delighted this important initiative is being supported by a major fund group M&G, in conjunction with their services provider IFDS, and we believe that enabling them to be settled in the same way as equities and bonds will significantly broaden their appeal to investors that until now, preferred investing directly in those assets instead of using funds.'
He added: ‘This should bring distribution costs down substantially, as well as fund manager costs.’
Rudd said one of the largest parts of a platform’s cost is the maintenance of keeping records of what their holdings are, who owns what, the number of subscriptions and redemptions, among many other settlement factors.
Making the funds available on Crest means this information is accessible in real time, meaning reconciliation information is available at the press of a button, via a centralised system.
‘This means platforms can more easily work out what their balance on a given fund is, view in real time exactly what is going on, and this will bring down costs for platforms in the UK,’ said Rudd.
He said the move will bring clarity to both fund groups and administrators, in terms of efficiently providing information such as who has paid and what corporate actions have been processed, for example.
‘Crest currently does the same for equities and bonds, bringing clarity to the broker community on what they own,’ he said.
Rudd added the system makes transfers or ‘re-registration’ fully electronic, using the same equity and bond infrastructure, but adapting it for funds.
'Transferring' is the re-registration of a holding between one platform and another, because a retail client is moving between systems, switching from one broker to another.
Rudd emphasised this electronic settlement does not affect trading.