Students helped Finland’s Central Securities Depository to research and combine fund industry information

The team learned a lot about the fund industry and the role of the central securities depository
Euroclear-tiimi Kauppakorkeakoulun opiskelijaprojektissa
Tommi Vihervaara (left), Suvi Tyni from Euroclear, students Tuomas Levonen and Emmi Turunen, Ari Heinonen from Euroclear, student Jesse Viljanen, and the academic supervisor of the project Andrew Conlin

Euroclear Finland commissioned a student project from Aalto University School of Business to research the Finnish fund industry landscape and interest in the book-entry system. The project was implemented by master’s degree students Jesse Viljanen (Economics), Emmi Turunen (Information and Service Management), and Tuomas Levonen (Finance) from May to August 2023. 

Euroclear Finland is the sole Central Securities Depositary (CSD) in Finland, and as such, they are responsible for the operation and safekeeping of the book-entry system. The book-entry system is, in essence, a list of who (individuals or institutions) owns certain financial assets. These assets include listed company shares, some private company shares, and bonds. While integrating fund units in the book-entry system is possible, it has not been implemented in Finland to date. Thus, the main goal of this project was to help improve Euroclear’s understanding of the Finnish fund industry’s practices and to evaluate potential added-value solutions Euroclear could provide for funds, either with the book-entry system or without. 

The project was carried out under the supervision of Andrew Conlin, a postdoctoral researcher from the Department of Finance. The team also received extensive help from Euroclear in understanding the book-entry system and its operations. Thanks to Euroclear’s established connections, students were able to secure invaluable interview opportunities with leaders from Finnish management companies. Additionally, students had the chance to interview experts from institutional investment company, Euroclear group, and VFF Norway. 

Impressing project supervisor with excellence 

The most crucial in the project were the interviews carried out with fund management company leaders and other relevant players in the fund industry. In total, the team conducted over ten interviews, mostly with industry experts from Finland, but also from Denmark, Norway, Sweden and Netherlands. In addition, extensive desk research was carried out on different fund markets and specific laws affecting the fund industry. 

‘Euroclear plays an extremely important role in the financial market infrastructure of Finland, although many investors may not be aware of this. Success in this project would require an understanding of how the book-entry system functions, the legal requirements and restrictions, and a comprehensive look at fund management companies’ operations,’ says Andrew Conlin, the academic supervisor of the project. 

Andrew felt that the student team met the challenge: ‘Emmi, Jesse, and Tuomas showed a great team effort in collecting information and conducting interviews. They were able to manage a large and broad set of data, identify the most important things, and highlight the key findings towards the project’s goal. The work they did for this project has wider implications, as a well- functioning book-entry system is a key part of a safe and secure financial market, something which benefits all investors.’ 

Integrating a broad spectrum of information to uncover new insights

Through the interviews, the student team established a comprehensive view of the Finnish fund industry. Compared to the fund industry in other Nordic countries, the fund industry in Finland is more concentrated and less developed, especially regarding fund distribution. However, the technical capabilities of the fund management companies interviewed surpassed expectations of both the team and Euroclear. In this aspect, the Finnish fund companies seemed to be well ahead of their Nordic counterparts. 

The final presentation of the project, which was an overview of the Finnish fund industry and the value solutions Euroclear could offer, received praise from Euroclear. According to Ari Heinonen, the project owner from Euroclear, the team captured a complex topic very well, referencing how the team was able to collect and present the most critical information of the fund industry relevant to Euroclear. ‘The last and previous meetings had served as great discussion platforms for Euroclear. They sparked a conversation on how Euroclear could be more visible to fund management companies in the future.’ While some of the information presented was already familiar to Euroclear, Suvi Tyni, the Chief Business Officer of Euroclear, said that the work, and especially the interviews unveiled critical details for them regarding the current position of the Finnish fund industry. 

The team learned a lot about the fund industry and the role of the central securities depository. The experts who were interviewed provided important perspectives on the diverse operational models within the industry, highlighted the most significant challenges confronting Finnish financial institutions, and revealed new topics and issues that many fund management companies are grappling with. ‘Everyone we interviewed consistently identified changing regulations as the most significant challenge. Notably, the area of changing regulations has not been covered very thoroughly in our business school courses. Therefore, it was invaluable to gain insights into the industry through these interviews, deepening our understanding of the processes and challenges that real companies confront within the fund landscape in Finland,’ the team commented on the key takeaways.

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