In a joint statement, the companies said the current administrative processes associated with the South African mutual fund industry are “fragmented, with no automated way to link cash payments with unit fund orders in a low risk environment”.
Through its collaboration with Euroclear – the world’s largest provider of cross-border settlement and related services for bond, equity, derivatives and fund transactions – Strate said it hopes to develop an electronic and centrally hosted fund settlement platform.
Furthermore, the companies said the new “end-to-end solution would be sufficiently robust and resilient to serve as an infrastructure for both domestic and international market participants, with settlement conducted in central bank money for South African investors”.
Strate chief executive, Monica Singer, said: “The fund unit and cash components of mutual fund subscriptions and redemptions in the South African market are credited or debited several days after cash has been received for settlement.
“We will investigate how Strate can improve this process, potentially centralising fund ownership registration and delivering a safer and more efficient means to enable our local fund industry to grow.
“Strate, with the help of Euroclear, will determine the best way forward. Our next steps include engaging with local stakeholders to define the required functionalities as well as the timing for implementation.”
The South African mutual fund industry is valued at around ZAR1.3trn (€91bn, $120bn, £77bn), comprised of 42 fund management companies with over 1, 200 active funds.
