Fund distribution: Going beyond borders
How do you turn a good investment idea into a global success story? After all, a good investment idea should know no borders. The current challenging economic climate, the ongoing drive to reduce cost and increasing competition for market share are all factors leading asset managers to seek distribution opportunities in new markets. But what are the tools needed in order to tap into these opportunities?
“The UCITS brand has become recognised world-wide as a ‘quality-stamp’ for regulated investment funds, which in turn opens doors when applying for registration in new markets.”
Firstly, you need advice to help you select the appropriate structure for your fund. Luxembourg and Ireland are the traditional cross-border fund centres, as evidenced by the success story of their fund industry and the high concentration of their funds registered for cross-border distribution. The UCITS brand has become recognised world-wide as a ‘quality-stamp’ for regulated investment funds, which in turn opens doors when applying for registration in new markets. However, with UCITS IV and a number of local developments, more traditionally domestic fund markets, such as France, have introduced measures to facilitate cross-border distribution. At SGSS, we can advise you on the option most suited to help you achieve your goals.
Each fund needs a Central Administrator. It is important when selecting the fund’s central Transfer Agent that the partner has the scope to support your distribution ambitions. UCITS funds have enjoyed particular popularity in Asian markets, as well as being an investment vehicle of choice for South American pension funds and non-US clients of US brokers. A competent partner can offer a consistent service experience for investors and distributors no matter where they are across the globe. At the same time, your partner should be flexible enough to handle local specifics and servicing. Transfer Agency is a people business and people live in different time zones, speak different languages and earn, save and invest in different currencies. SGSS can assist, for example offering a local office in Asia to service investors and distributors in their own time zone and language, supporting the complexities of retail distribution in Italy or acting as pre-centralizing agent linked to the Euroclear platform in France.
Armed with a fund structure and central administrator, it is time to market your funds. When registering funds to be marketed in a specific country, it is required to appoint a Local Representative Agent. The Representative Agent takes care of the transmission of the required documents to the Regulator, translation into the local language and administration of the payment of fees. Once registered, the status of the fund must be maintained with the provision of financial reporting and statistical and publication requirements. Through our network, SGSS can provide this service in 16 countries.
Finally, for funds to be actively sold, distribution partners need to be remunerated. In this rapidly changing landscape, it is important to be reactive to local market norms and individual agreements. Remuneration has not been immune to the increase in regulation that has impacted the industry. Depending on the market, sales commissions can range from straightforward front-end load arrangements to contingent deferred sales charges. Similarly, trailer fee arrangements, performance fees and other retrocession arrangements need to be managed in a dynamic manner. SGSS can administer your distribution arrangements from start to finish – with the negotiation of distribution agreements and trailer fee rates, the collection of trailer fees earned by the fund and the calculation and payment of trailer fees to distribution partners.
The fund distribution landscape is rapidly evolving. And so too are the chances that your good investment idea can truly become a global success story. The introduction of the AIFMD passport promises further opportunities over the coming years in the alternative fund space. SGSS can propose a package of services to assist in the distribution of your fund. Talk to us about how we can help support you in the distribution of your funds. We look forward to hearing from you.
- When seeking to benefit from distribution opportunities in new markets:
- Select the appropriate structure for your fund
- Select a Central Administrator
- Appoint a Local Representative Agent to register funds and market funds
- Delegate remuneration responsibilities
- The introduction of the AIFMD passport promises further opportunities