The Unit Trust of India has set a benchmark in the mutual fund industry with the completion of its front-office automation.

The entire gamut of activities related to the secondary (equity and debt), primary and money markets are now fully automated and integrated, making UTI perhaps the only fund in the country to achieve such a level of automation.

The automation defines the workflow of various departments, providing integrated modules to suit the needs of fund managers, dealers and mid-office suite.

A K Sridhar, chief investment officer at UTI elaborated, "We are redefining industry standards and are going to set a trend in which the asset management industry is going to function in the future."

Launched on October 16, 2002, the system is now close to completing 100 days of operations.

The automation has rid the investors' biggest concern of manual inter-scheme transfers by the trust. The new system identifies and matches complementary trades, generating inter-scheme transfers automatically with the appropriate price reference drawn from the NSE or the BSE. "On most occasions, we don't even know which scheme is buying or selling," a fund manager with UTI said.

Shridhar said, "Availability of instant feedback from the system to all the group concerns provides greater opportunities for fund managers to align their actions with market realities."

Front-office automation is a comprehensive system defined in terms of regulatory and investment exposures, monitoring delegation levels and facilitating quicker dissemination of data to the front, middle and back offices.

"The next logical step now would be is to provide decision-making support," another fund-manger added.

UTI has now become the only fund to have a 5-layered structure of management, that is, advisory (equity research and debt and macro research), decision making (fund managers and chief investment officers), execution (dealers), booking keeping (accounting, valuation, net asset value calculation, corporate action and recovery) and controlling (internal audit and compliance).

Though private mutual funds have come a big way in terms of size, their front-office automation remains a cause for concern, according to industry observers.

Last September the Securities and Exchange Board of India, while dealing with risk management practices of asset management companies, had said the systems of a mutual fund should integrate the front and back-offices for fund management, dealing, trade confirmation and settlement.

This will facilitate setting up of parameters such as asset allocation limits, straight- through processing to allow one-time capture of investment decisions, system check on preset parameters and reporting of breaches, automatic time-stamping of deals, monitoring of outstanding confirmations, settlements and payments, decision support capabilities and portfolio modelling, risk-adjusted performance measurement, reporting on target versus actual portfolio.

Sebi has also commented that currently most players are too small to warrant a segregation of duties between fund managing and dealing.

However, as the industry matures and volumes increase, this will be an area that should be looked into more closely, with a view to setting clear guidelines for best execution.