DTCC and SWIFT Will Collaborate on Global Message Standards for the Alternative Investments Market
DTCC and SWIFT announced in July an initiative to expand options for communicating with DTCC’s new Alternative Investment Products (AIP) suite of services. This collaboration on global message standards will provide market participants the enhanced ability to connect to the AIP service suite using ISO 20022-compliant XML messages and the SWIFT network, in addition to the proprietary message formats and direct link to DTCC that is available today.
AIP, a service that links broker/dealers, fund managers, administrators and custodians, provides settlement of subscriptions and redemptions for various alternative investment vehicles, automating the exchange of all trade-related account information. Offered by DTCC’s National Securities Clearing Corporation subsidiary, AIP received regulatory approval from the U.S. Securities and Exchange Commission in May.
“Building formats and messages in collaboration with SWIFT eases customer implementation of AIP, and addresses the market demand for building messaging interfaces only once,” said Ann Bergin, DTCC managing director, Wealth Management Services. “Feedback from our joint DTCC-SWIFT working group was very clear on this point: greater interoperability between global participant organizations and industry utilities benefits everyone who’s active in the alternative investment space.”
The announcement that the organizations are working together on standards for alternative investments has been welcomed by the hedge fund industry. Speaking at a meeting jointly hosted by DTCC and SWIFT in Dublin in May, Gary Palmer, CEO of the Irish Funds Industry Association, said, “I am delighted that organizations such as DTCC and SWIFT have come together to work towards the common good to improve processing efficiency globally for hedge funds.”
Standard formats and messages
AIP offers an automated solution to replace historically manual, fax-based processes. Currently, customers of the AIP service communicate through XML, mainframe file transfers or spreadsheet uploads. Most of the world’s largest fund administrators operate in the U.S. and overseas, and the jointly developed message standards – targeted for testing in the fourth quarter of 2008, with full production in early 2009 – will enable market participants to use one solution globally.
Alternative investment products include funds of hedge funds; single hedge funds; Real Estate Investment Trusts (REITs); private equity funds; and energy, equipment and commodity pool funds. These are typically pooled investment products that are offered through private placements to high-net-worth individuals and institutional investors, such as pension funds. Driven by investors’ desire for portfolio diversification, the market for alternative investments has grown significantly since 2000. Hedge fund assets alone have grown to $2.7 trillion and are projected to reach $4 trillion by 2010. REIT assets, at $438 billion, have almost tripled in just five years.
This collaboration between DTCC and SWIFT to develop messages for processing alternative investments is just one of a number of initiatives on which the two entities are jointly working, to meet the industry’s requirement for greater harmonization of trade processing globally. @