Roger Woolman, SS&C Advent

EU Super ManCos’ time has come… but operational complexity poses barrier to success

By Roger Woolman, Business Development Director, Asset Management & Alternatives, SS&C Advent – Dual-authorised “Super ManCos" are an ever growing force in the EU investment management industry. Intense competition between asset managers, compressed margins, and the search for investors and investment returns are one factor, as they continue to reduce the barriers between the traditional and alternative investment worlds. Then there is the uncertainty surrounding Brexit, and investment firms’ scramble to retain access to the European Single Market. 

In this environment, it is easy to see why the expanding breed of EEA-domiciled management companies (ManCos) able to provide cross-border support for both UCITS and alternative investment funds (AIFs) are coming to the fore. 

For the Super ManCos though, delivering a high-quality and responsive service that can support different fund structures and a range of AIF and UCITS investment strategies demands both a broad blend of expertise, and a robust and scalable supporting infrastructure. 

Rise of the Super ManCos 

Under European Union rules, every UCITS fund must appoint an EEA-domiciled management company, which has overall responsibility for functions such as discretionary investment management, fund administration and distribution. Alternative investment funds likewise need an EEA-based ManCo to benefit from the AIFMD passport.

Cross-border management companies traditionally provided services for either a UCITS or AIF. The new breed of Super ManCo though can take on the regulatory compliance and operating requirements for both types of fund under a single umbrella. 

Along with the efficiency benefits they provide, interest in and demand for Super ManCos is being fueled by Brexit. At the time of writing, considerable uncertainty remains about when and even if Brexit will ultimately occur, and if it does what that will mean for the investment industry. Asset managers though can no longer afford to wait and see.

EY’s Financial Services Brexit Tracker found that, as of 30 November 2018, 44% of the UK’s largest asset and wealth managers have, or intend to, move some of their staff or operations from the UK to an EU27 domicile to ensure continuity for their clients and investors1. EY analysis suggests financial services companies as a whole have transferred at least £800bn of assets from the UK to Europe so far. And those figures will only increase the closer we get to exit day without a deal.

In the absence of a watertight agreement that delivers meaningful and stable long-term equivalence for the investment management sector, UK managers will have no choice but to establish or hire an EEA-based management company for their AIF and UCITS fund ranges. Leveraging a Super ManCo that can do both increasingly makes the most administrative and economic sense.

Ireland and Luxembourg lead the way

Establishing a Super ManCo has become relatively straightforward. 

According to law firm McGann FitzGerald, the Central Bank of Ireland has “streamlined the authorisation, on-going supervision, managerial functions and governance of AIFMs and UCITS ManCos,” which makes establishing an Irish Super ManCo an attractive option2.

For instance, Legal & General Investment Management (LGIM) received regulatory approval for a Dublin-based Super ManCo in May last year, which the firm will use to manage its European funds as part of its Brexit contingency plans3.

Others – such as Nomura Bank subsidiary Global Funds Management (GFM), which has added a UCITS management company licence to its AIFM one4 – have set up as Super ManCos in Luxembourg, as they seek to expand their third-party client bases. 

A winning business case for fund manager clients 

When done well, a Super Manco enables providers to service different fund structures and a range of AIF and UCITS investment strategies with a single:

• legal entity
• board of directors and executive team
• capital adequacy requirement
• regulatory manual and framework
• audit

By centralising and consolidating functions in this way, Super ManCo clients can enjoy greater operational and regulatory efficiencies and expertise, rather than needing a separately regulated and capitalised entity per fund range. In addition, a Super ManCo makes it easier and quicker to launch new product ranges that can take advantage of those all-important pan-EEA passporting regimes, since no management company-related approvals are needed.

No wonder the integrated services offered by Super ManCos are proving popular with the ranks of investment managers keen to expand their product offerings and enhance their investment appeal. 

But delivering a consolidated ManCo service brings operational complexity 

For the Super ManCos though, delivering a high-quality and responsive service is a challenge. It demands deep expertise spanning the mutual and alternative funds worlds, along with an operating infrastructure to match. This is particularly true for those ManCos that wish to monitor financial compliance, risk and/or offer operational outsourcing services.

Key capabilities for those Super ManCos in particular include:

• Extensive multi-asset and multicurrency instrument coverage
• Support for multiple, often complex account and fund types
• Streamlined front-to-back workflow
• Automated pre- and post-trade compliance
• Real-time performance, P&L, position and exposure information
• GIPS-compliant performance reporting
• Comprehensive and customisable management, client and regulatory reporting

The value of a trusted support partner 

An integrated front-, middle- and back-office technology infrastructure, with the built-in functionality to cope with the diverse requirements of traditional and alternative investment funds is essential. For the speed, quality and breadth of services a Super ManCo can provide will be crucial in attracting clients and providing them with the operational assurances they need. 

At SS&C Advent, we have developed a set of comprehensive and highly-configurable tools that give Super ManCos the agility to get their business up and running in a matter of weeks, while equipping them for the long term—providing firms with scalable and proven capabilities to support their clients’ varied demands, whatever is thrown their way. 

And because of the flexibility of our delivery model, users can leverage our award-winning solutions either through an on-premise software installation or on a fully-hosted basis in the cloud, as well as having the option to outsource elements of their operation where it makes business sense.

Powering Super ManCos with SS&C Advent’s proven solution suite 

Seamless and comprehensive instrument coverage

Trade, aggregate positions and view exposures with ease and efficiency across all asset classes.

Support multiple account and fund types 

Consolidate all fund types on the same platform.

Investor accounting and servicing for onshore and offshore funds

Manage investments and investors in one place.

Built-in NAV capability

Calculate daily fee accruals and net asset values.

Real-time investment book of record (IBOR)

Single source of consolidated data provides accurate and timely views of portfolio data across the entire firm.

Hands-on portfolio monitoring

Customisable dashboard views cover gains and losses, performance, exposure, forecasting and market data.

Simplified reporting

Enjoy fingertip access to an extensive library of automatically-generated and distributed reports.

Complete trade lifecycle management

Seamless integration to market data providers, risk systems and counterparties allows users to track trades from placement to settlement through a single system.

Full audit and security controls

Full audit trail and highly-granular user access controls reduce operational risks and demonstrate best practices to meet investor due diligence and regulatory scrutiny.

Fast and easy platform integration

Open architecture-based solutions provide easy connectivity with external counterparties, market data providers and third-party systems.

As a result, firms can minimise their IT infrastructure and maintenance costs, reduce operational risks, ease their compliance workload, scale their business efficiently, and create the sort of industry-leading Super ManCo services that will set them apart from the burgeoning competition.  
 


 

1 EY Financial Services Brexit Tracker, EY, 7 January 2019, https://www.ey.com/uk/en/newsroom/news-releases/19-01-07-ey-financial-services-brexit-tracker-heightened-uncertainty-drives-financial-services-companies-to-move-almost-800-billion-pounds-of-assets-to-europe 
2 Brexit: Establishing a Fund Management Company in Ireland, McGann FitzGerald, 13 April 2017, https://www.mccannfitzgerald.com/knowledge/brexit/brexit-establishing-a-fund-management-company-in-ireland 
3 LGIM transfers European client funds to Dublin, by David Campbell, 14 May 2018, https://citywire.co.uk/wealth-manager/news/lgim-transfers-european-client-funds-to-dublin/a1119298 
4 Nomura Luxembourg subsidiary becomes ‘super ManCo,’ by Nick Fitzpatrick, Funds Europe, 20 February 2018, http://www.funds-europe.com/news/nomura-luxembourg-subsidiary-becomes-super-manco

 

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