Major domestic Luxembourg bank Spuerkeess will move the majority of its fund portfolio to Euroclear FundsPlace as part of its effort to streamline and cut costs in its fund business, the bank has announced this week.
The bank said it “has decided to move away from transfer agents and centralise the distribution and execution services of its funds.”
Euroclear’s funds platform has started to manage the lion’s share of the Spuerkeess portfolio and “collect trailer fees on external custodians” as well.
Leveraging existing relationship
“We are very pleased to have selected Euroclear FundsPlace and to expand our already existing relationship with Euroclear to the fund assets,” said Aly Hohil, Spuerkeess’s deputy CEO and executive committee member in a statement.
Luc Hieronimy, deputy head of financial markets operations and network at Spuerkeess explained to Investment Officer that Spuerkeess has found its historical practice of working with “numerous transfer agents” had led to a “significant workload”, due to non-digitised document flows.
“This move not only ensures streamlined transaction processes including subscription and redemption of orders, clearing, settlement, and custody but also replaces manual paper-based methods with automated and secure solutions through Swift integration,” Hieronimy said.
Results require savings
The bank reported a 0.9% reduction in its net income between 2021 and 2022, with 234.7 million euros at the end of 2022. The bank is clear that it sees the Euroclear decision as in part a cost-cutting exercise.
“The fully integrated model from subscription, execution, settlement, custody and trailer fee collection allows Spuerkeess to reduce its costs and operational risks and ultimately to offer an even better service to its retail and institutional clients,” said Aly Hohil, Spuerkeess’s deputy CEO and executive committee member in the press release.
In fact, Spuerkeess is due to double down on the outsourcing, Hieronimy confirmed.
Doubling down
“We are preparing to launch the other part on a second platform very soon, and its set-up closely resembles that of Fundsettle/Euroclear,” he said. “Collaborating with two platforms provides us with a level of flexibility, along with an operational back-up plan that can be activated as needed.”
The bank has won industry awards for its investment bank role. Hironimy said he doesn’t see any risk to that branding from the outsourcing move.
“It will provide our clients with access to a wider selection of funds assets and improved service efficiency,” he said. “We have consistently strived and will continue to strive to excel in all products and services, aiming to be at the forefront in our industry.”
Not everything
However, he drew attention to the fact that Spuerkeess has decided to opt “a large part” of its fund assets to Euroclear. “But not for all,” he said.
Asked about the Euroclear-only branding decision, Spuerkeess and Euroclear stated that the press release was joint. “We did not plan to issue a press release on our own behalf, said Hieronimy.
Euroclear group describes itself as “the financial industry’s trusted provider of post-trade services.”
Euroclear claims that, “as a proven, resilient capital market infrastructure” it is “committed to delivering risk-mitigation, automation and efficiency at scale for its global client franchise.”
Luxembourg owned
Spuerkeess has been wholly owned since its foundation in 1856 by Luxembourg as a nation state. It has statutory missions to promote savings, facilitate access to housing and support the development of the national economy. It is the leading bank in the retail and domestic small and medium enterprise markets.
It runs what it describes as Luxembourg’s largest network of branches and self-banking spaces and employs some 1,800 people. It trades on its strong credit rating and its experienced advisors.