The majority of managers who aim to develop their business in Europe will consider using a management company platform or otherwise known as a ‘Super ManCo’. As managers do not have to commit to large amounts of capital and resources, the third party platforms continue to expand.
The ever-growing amount of platform providers are used by a remarkably wide range of managers. This includes hedge funds, funds of hedge funds, private equity funds, real estate funds, infrastructure funds and others. Managers from within the EU, and also from the US, are signing on to utilise these entities in order to become compliant with the Alternative Investment Fund Managers Directive (AIFMD) and/or get an Undertakings for the Collective Investment of Transferable Securities (UCITS) stamp for their investment strategies.
But whereas the competition for UCITS platforms has been going on for many years, the picture for AIFM platforms seems blurrier. No provider of third party AIFM has built a dominant role in the market in any particular fund category, market segment or fund jurisdiction so far. Market consolidation still seems far away and one cannot speak about AIFM platforms being a standardised and homogeneous sector of the fund industry. Talk about pricing, some platforms takes into account a fund’s complexity when determining the fees that they quote; while some base their fees in part as percentage of the fund’s assets under management (AUM) whilst for others it is just a flat rate that is charged.
When looking at the UCITS platforms available on the market, it seems that independent or boutique platforms are at the forefront. They have gained more attention and have been more successful in attracting new managers and funds than those platforms operating within an investment bank or prime brokerage environment, or even asset manager-led platforms launching in-house as well as third party funds.
Market drivers in a challenging environment
Managers want to broaden their investor base more easily and for greater value – but regulatory restrictions and business economics make it impossible for any one partner to serve all markets on their own. Allying with like-minded partners enables everyone to provide their clients with global structuring solutions and in some cases, even an extensive distribution network.
Regulatory changes in tax, reporting, depositary and market infrastructure have increased the demand for transparency and security, and as a consequence, also the requirements on regulated vehicles. Creating easy access for investors to multi-disciplinary local and regional investment strategies through a single global platform united under internationally recognised regulatory excellence like AIFMD or UCITS is helping regional and local managers. Managers that wish to diversify their clientele in the global markets are well advised to choose the right structure for their investment strategy to meet investor’s needs.
On the other hand, easy access to secured and regulated investment vehicles throughout the globe is key for investors.
Facing the challenge of successful fund distribution
The question how to engage efficiently and successfully with institutional fund buyers and fund selectors still remains as the value chain of fund distribution is shaken up and down. Increasing pressure from risk and audit departments, cost saving and efficiency requirements as well as shortage of time and centralised decision-making underpins the importance of streamlined operations and easy access to information. Furthermore, digitalisation has finally entered the asset management sphere.
The need for lower operational costs and the changing information flow requires another level of interaction and communication. This will further increase over the years ahead, as easy information access and transparency are essential for fund selectors.
Allying with like-minded partners in a global distribution network adds a special benefit to client service. Together with selected partners, asset management firms can develop and optimise their fund distribution approach in a smart, practice-focused and cost-efficient manner. Platforms for UCITS funds and alternative investment strategies that offer access for independent regional and local managers to a multinational platform of global investors will dominate the markets in the future.
About the author
Manuela Fröhlich is Global Head of Business Development at LRI Group.