BBH looks to spread funds automation drive across Asia
US-based Brown Brothers Harriman (BBH) is striving to build out its automation initiative Infomediary across Asia after launching the service in Taiwan.
The firm announced this week it had signed up several Taiwanese banks and fund promoters to use the tool, which is designed to aid efficiency and control costs.
Effectively acting as a data translator, Infomediary converts order flows into standard format messages, then transmits them through the Swift network and provides a corresponding order confirmation message from the transfer agent.
This enables distributors to send order files directly to global fund promoters or transfer agents and receive corresponding status and confirmation messages back into their accounting system. In other words, it allows straight-through processing of what has been a manual process.
Joe Conway, global head of sales and marketing for BBH Infomediary, likens the typical operating structure of an asset manager or bank (click image, left) to a bowl of noodles (the firm’s preferred simile in the US is “spider’s web”).
“What Infomediary does is sit in the middle and connect systems,” he says. “If you are an asset manager running a trade order management system to buy and sell securities, you have to communicate that information to parties to do your banking and settle your trades.
“In the after-system with Infomediary, all those lines are gone and there’s just a single pipe into Infomediary. We then communicate outwards.”
Conway says BBH started this business in the US a decade ago on realising it needed a niche because it couldn’t compete with larger rivals, which at the time were lifting out entire back-office systems as a cost-saver.
“The mechanics of [Infomediary] are not sexy, it’s just moving data back and forth,” admits Conway. “But what it will do for fund managers and banks is increase the power of distribution. You can talk about performance and fund ratings, but what managers also care about at the core is distribution, more people subscribing and taking up their funds.”
He explains that distributor banks typically need two hours to take orders, process them and send information to the fund house before cut-off for stating NAVs.
“If the process takes two hours and five minutes, you’ve got a real problem because the order has gone past the real deadline,” he notes. “But when someone is fully automated, they can do the same process in five minutes. If you have to stop selling funds because of this two-hour [processing] window, and suddenly you can sell funds a bit later, that is a lot more selling power.”
He notes that 10 Taiwanese banks are fully committed to the initiative, while a further 10-15 are in the pipeline.
E. Sun Bank in Taipei was the first distributor bank in Taiwan to test the service. Conway says it has a further seven Taiwanese banks in its implementation queue waiting to roll this out.
“Our focus has been Taiwan to start with because fund managers have said Taiwan is their number one priority,” Conway notes, adding he also sees opportunities to roll out Infomediary in Singapore, Hong Kong, Korea and possibly Japan.
“I think Singapore is the next likely market. It has the same situation where everything is non-standard – there’s faxing, phone orders, very low automation, but fairly high volume.”
In terms of the fee structure for Infomediary, there are set-up costs and then a per-messaging fee, meaning the higher the volume of orders going through, the more users pay.
BBH’s Infomediary initiative is supported by the Asian Fund Automation Consortium, whose members account for about 80% of Asia cross-border fund flows, and other global promoters.
Commission participants with BBH’s initiative include AllianceBernstein, Baring Asset Management, BlackRock, Fidelity International, Invesco Asset Management, Janus Capital Asia, JP Morgan Asset Management and Schroder Investment Management.
Simone Thelen, vice-president and general manager of AllianceBernstein Investor Services and AllianceBernstein Investments, describes this as an important industry initiative to improve operational efficiency and reduce risk associated with faxes and manual order processing.
Conway adds that BBH is also looking to replicate the Infomediary systems support group it has on the east coast of the US in Hong Kong to cover Asia.
“We will be one of the first groups in our bank to have the same resources available in Asia as the US,” he notes. “How successful we are will probably be a model for other things that we do.”