EU index managers face funding risks as US moves to T+1
Rotations from European to US assets will need prefunding due to slower EU settlement
European index tracker fund managers may need short-term funding lines when the US switches to a one-day (T+1) settlement cycle on May 28, but possible solutions could have drawbacks of their own.
The problem stems from the fact that European markets will remain on a T+2 cycle for now. If securities are sold in Europe and new securities bought in the US, this could leave an asset manager needing a day’s funding while they wait to receive the cash from the sale leg of the trade. This would be
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