UCITS Fund Platforms: a turn-key solution for Asset Managers
Platforms are a cost-effective distribution vehicle to the European market and other regions where UCITS are sold and are rising as the solution of choice for asset managers seeking swift access to a UCITS fund structure.
This perspective is further strengthened by the recent Brexit vote and increase in EU regulations.
In the event of a “hard” Brexit, UK UCITS ManCos will lose their passport to manage EEA UCITS, making them unable to appoint a UK distributor to EEA customers. Under these circumstances, UK managers may want to consider appointing an EEA UCITS ManCo who will then delegate the investment management back to the UK investment manager.
Given the increased regulatory and reporting requirements under UCITS, having a third party ManCo removes a significant burden for managers. The board and the ManCo of a UCITS platform take primary responsibility for the majority of the ongoing compliance, corporate governance and risk management processes, thus allowing an investment manager to focus on portfolio management.
SGSS’ Solution: Gateway
SGSS provides a robust, efficient and flexible solution to launch your own UCITS compliant sub-fund on the Gateway UCITS Platform. We provide a one stop shop service, allowing the investment manager to focus on portfolio management and distribution. The Gateway UCITS structure is an Irish authorised PLC and is regulated by the Central Bank of Ireland.
Using the Gateway Platform has enabled us to focus on our core investment management expertise and on distributing the fund across Europe which has helped us to achieve the excellent returns to-date. The robust infrastructure and excellent services provided by SGSS through the Gateway Platform has helped facilitate this. Their local knowledge in the European markets has assisted the distribution of the fund. As our fund trades listed derivatives appointing SG Prime Services as Clearing Broker made a lot of sense.
The growth of UCITS platforms has been dramatic since they were first launched. Providing benefits such as cost-effectiveness and removal of the administrative burden, it is no surprise that these vehicles generate so much interest. Given the increases in regulation and political uncertainties, the interest is stronger than ever.
The platform model offers an alternative to launching a UCITS fund, where the manager may not have the resources and/or time to setup and oversee a standalone UCITS. The platform solution has become popular with US managers who want to explore the European market while not incurring significant cost and other resource burdens.
Platforms are particularly cost-effective for emerging managers who require a full suite of fund services along with legal and infrastructure support. It is essential for new managers that set-up and ongoing costs, total expense ratio (TER), are kept as low as possible. Many of the fixed overhead costs of a platform are allocated to each of the underlying sub-funds, therefore lowering the per fund cost to the investor, thanks to economies of scale. Furthermore, using an established platform will lead to a speedier fund launch as the core UCITS structure will have already been approved by the regulator. Launching a new sub-fund is a simple process compared to launching an owned structure.
Platforms are UCITS umbrellas where a board of directors appoints a Management Company (“ManCo”), which in turn designates an investment manager as a sub-adviser to carry out the proposed strategy of each sub-fund. Fund administration, depositary and transfer agency are part of the standard offering. An investment manager can focus on portfolio management by “renting” sub-funds on an established structure and leaving the ManCo and board of directors to assume oversight and regulatory functions
Selecting a platform has several key considerations.
- Capitalization/Substance: Does the ManCo and other service providers in the structure have a strong financial position?
- Scope/source of services: What services are included in the offering? Who is providing the services? How do they fit together from a pricing and integration perspective?
- Distribution strategy and support: What type of strategies, markets and investor types are targeted?
- Marketing/branding: Whose brand is being promoted?
- Pricing transparency: How are the services bundled?
- Flexibility: What are the terms from exiting the platform? Is there a path to an owned structure?
A ManCo of true substance and experience
Societe Generale Securities Services GmbH (SGSS Germany) has over 50 years of experience in the funds industry. It currently has €117 billion of assets under service and acts for well-known European and US managers in the UCITS and non-UCITS areas. Regulated by the German BAFIN, it has passported its services into Ireland under European Union law, with the adoption of the UCITS IV directive.
The KAG does not rely on risk reports generated by the Investment Manager; however, to ensure independent oversight, it can produce through its own system VAR calculation, stress testing, back testing, etc.
A wide array of integrated services
SGSS additional services:
- Fund administration and transfer agency
- KIID, performance attribution, measurement and contributing reporting, Solvency II reporting
- Share class hedging
- Stock lending
- Solvency II reporting
- Execution services
- Listed derivatives, and synthetic prime brokerage , through SG Prime Services
Through its own affiliates and thanks to agreements with third parties, SGSS provides Local Representative Agent services (as required under the UCITS directive) in 18 countries across Europe and to Asian investors through our distribution hub in Hong Kong. We are also able to provide any required local taxation reporting.
This local knowledge enables SGSS to have a full grasp of local conditions and requirements for distribution. What’s more, it allows the fund to have a single access point to European distribution. It is worth mentioning that we also work with third party marketers, which we can introduce to investment managers.
The platform was designed to allow the investment manager to brand its own sub-fund. We also provide a website to host the fund documents, prospectus, supplements, and required KIID.
Gateway offers simple, transparent, and cost-effective pricing.
Clear path to owned structure
Many investment managers have the requirement that in the longer term they would like their own structure, and ultimately set up their own ManCo. Many Platforms that offer ManCo-only solutions are keen to tie the sub-investment manager to a long-term contract. Tanks to the breadth of services SGSS offers, we can facilitate transfer to an owned structure while continuing to add value through the provision of non-ManCo services.
In concrete terms, why Gateway?
Societe Generale’s size, financial strength, and wide ranging service capabilities make SGSS UCITS Platform, Gateway, a unique substantive offer.
The attached brochure is for Non-US Managers. US Managers should contact SGSS for the appropriate documentation.