(Bloomberg) -- Jupiter Asset Management plans to cope with faster US equity settlement by purchasing dollars in advance of trades, an example of the changes global money managers are having to make to limit the risk of failed transactions. 

The London-based firm, which has £52.2 billion ($66.3 billion) in assets under management and more than 500 employees, will make sure it has dollars on hand before placing a buy order for US equities, Mike Poole, the head of trading at Jupiter Asset Management, said in an interview. The company is also staffing two people on a new Treasury team to help manage its cash balances, he said.

Starting May 28, US stocks will settle in just one day — a system known as T+1. The shift will put equities out of sync with foreign-exchange markets, where trades typically take two days to complete. That means investors who deal in currencies other than the US dollar are now rushing to figure out how to set up their operations, and make sure the cash that needs to change hands for a trade to settle arrives in time.   

Some firms including Baillie Gifford are moving staff to New York, or extending working hours after the US stock market close, even if this means buying dollars in a notoriously illiquid time in the market. Jupiter meanwhile, which current has no traders outside of London, sees the potentially costlier approach of pre-funding as the best solution. 

“We are not opening a US trading desk or seeking to trade at 9:00 pm London time,” Poole said. “The drop off in liquidity post 6:00 pm is incredibly challenging.”

But running cash balances for some time could stunt performance and tie up capital, so Jupiter’s new Treasury division will aim to more efficiently manage the excess. 

“If for some reason the trade doesn’t get done there may be some performance drag,” he added. “We are trying to mitigate that with this new centralized treasury function that can pro-actively manage the cash, if we are left with a cash balance we’ll be utilizing money market funds.”

Poole notes the model of pre-funding trades has been well tested in India, which moved to T+1 settlement in January last year, and where asset managers typically had to obtain Indian rupees ahead of trades anyway. 

“Indian markets often required pre-funding so the structure was already in place,” he said. “India’s move to T+1 went so well that they’re already talking about t-zero,” referring to same-day settlement. 

(Updates to add total number of employees for context on staffing change in paragraph two.)

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