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Settlement issues solved.
As open-architecture platforms continue to expand the menu of investment
options available to plan participants, value-added services are
required to integrate these options seamlessly on recordkeeping
platforms.
MSCS, along with affiliate MG Trust, provides customers with unitization
services, including an accounting process that translates a portfolio
of either single security or multiple securities into a unit price
for daily valuation purposes, thus eliminating different settlement
issues.
Unitized services are required to give plan participants the ability
to perform same-day exchanges across fund options when the asset
being unitized cannot be settled on a trade date plus one (T+1) basis,
the standard for mutual fund trades.
Same-day exchanges. Extraordinary results.
When you consider what occurs when mutual fund trades settle on a
T+1 basis and common stocks settle on a T+3 basis, without our
unitization services, a participant selling a common stock and
purchasing a mutual fund would have un-invested cash for three
business days waiting for the common stock proceeds to be available
before they could be reinvested into the mutual fund of his or
her choice. This further complicates the reconciliation process
for the plan provider.
MSCS provides unitization to allow retirement plan participants true
same-day exchanges among all the plan’s investment options.
Assets that can be unitized include:
- Company stock (publicly traded having adequate liquidity);
- Actively managed model portfolios (mutual funds in an asset allocation
portfolio as a plan investment option);
- Actively managed stable value portfolios (managed single or multiple
GIC securities as a plan investment option);
- Actively managed stock and bond portfolios; and
- Actively or passively managed ETFs as a plan investment option.
What is Unitization?
The unit price is made up of the securities’ (typically equities
and/or bonds) market value and cash value.
- Unit values are determined daily
- Participant have ready access to their interest/values without
extensive “blackout” periods (typically T+1)
- Dividends from securities are paid into cash and are reflected
in the unit price
- Security purchases are made by investment manager when the cash
value percentage is outside of required amount
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