Whereas a few years ago, managers were jumping in to the ’40 Act mutual fund market to either launch standalone alternative mutual funds or become sub-advisors to multi-manager products, the fact is that there are so many regulations, that trying to replicate a hedge fund strategy – or even a diluted version of it – is difficult.
A potentially more effective alternative is the unlisted closed-end fund (CEF); also known as an interval fund or tender-offer fund
UMB Fund Services’ (UMBFS) Registered Fund Solutions platform gives managers the opportunity to launch an unlisted CEF which may take daily subscriptions but only redeem once a quarter or otherwise as determined by the board of trustees. Along with ETFs, the unlisted CEF garnered the greatest interest from its client base in 2017, according to Maureen Quill, President of UMB Fund Services.
“The interest in these registered unlisted closed-end funds (including interval and tender-offer funds) continues to be significant. While these products often take a little longer to get started from a registration perspective, we are hearing more and more from clients and prospects interested in developing a product,” says Quill.
UMB Fund Services continues to be a leader in this space. According to the 2017 Mutual Fund Services Guide, the firm is ranked the top transfer agency for registered closed-end funds by number of shareholder accounts.
Last year, in partnership with FUSE Research, UMBFS published a report identifying over 109 unlisted CEFs available for purchase with total assets under management at approximately USD41 billion. Quill says that the data in the report “validated the perceived momentum for these products” and that momentum only increased throughout the remainder of 2017.
For most hedge fund managers, the registered product space is a whole new world and isn’t something they can enter into half-heartedly. The regulations and limitations of the ’40 Act require a different mindset to that of running a private fund. “Outsourcing accounting and administrative support is required and selecting an experienced partner in both ’40 Act’ funds and alternative strategies is crucial,” stresses Quill.
She adds that UMBFS’ experience in supporting administration and accounting for both ‘40 Act funds and alternative investment strategies allows it to quickly adapt to servicing unlisted CEFs “so the asset managers can focus more time on managing their products and investors”.
Technology is key to being a successful administrator, no matter what the asset class. UMBFS is continually evolving its automated financial reporting processes to meet changing regulatory requirements. For example, significant SEC modernisation regulations go into effect this summer and administrators like UMBFS stand ready to help managers meet these robust reporting and liquidity risk management requirements.
“This year we are also rolling out additional enhancements to our transfer agency workflow and automations for unlisted closed-end funds,” confirms Quill. “We have had a robust proprietary business processing solution in the transfer agency for some time and expect these fine-tuned enhancements will provide smarter processing and improve our ability to scale our business as the momentum in this product grows.”
This year, UMBFS will be focused on continued technology investments, with Quill referencing the need to support an evolving product landscape “We are working to position our firm to continue to be a top service provider regardless of the product structure,” she says.
On winning the award, Quill remarks: “We are thrilled to be recognised by Hedgeweek’s readership as we continue to focus on meeting the needs of asset managers today and into the future.”
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