Goldman Sachs Fund Solutions is a bespoke solutions-oriented fund investments platform that was launched in 2004 within the Securities Division. The platform, at large, provides investors with access to unique internal strategies via regulated funds (UCITS and AIFMD-compliant funds), unregulated funds, as well as managed accounts. In addition, it offers investors access to carefully selected external alternative fund managers; referred to specifically as the Third Party Managed (UCITS) Platform.
Laura Elliott (pictured) is an Executive Director at Goldman Sachs and oversees manager selection on the UCITS platform. Commenting on the importance of the alternative UCITS space, she says: “We see the UCITS platform as allowing our investors to access two of our key product types within the bank; hedge fund strategies through our strong external relationships and Goldman Sachs developed alternative risk premia products.”
Hedge funds have always been a key part of Goldman Sachs’s business, in terms of building relationships and supporting managers’ trading and execution needs, and providing access to securities (long and short), market research, etc. As managers increasingly look to diversify their investor base, regulated fund structures are being more seriously considered.
If one factors in that there is also growing interest in alternative risk premia (ARP) strategies, many of which are offered in a regulated wrapper, one can start to get a sense for why alternative UCITS funds are viewed favourably by Goldman Sachs.
There are currently seven managers and eight funds on the Third Party Managed Platform.
The platform currently has two alternative risk premia products managed by Aberdeen Asset Management, a selection of equity long/short strategies focusing on the US, on China, and on global markets, a managed futures strategy operated by the well-known US manager Campbell & Co, as well as a systematic macro fund operated by ADG.
“We are seeing demand for different types of products,” says Elliott. “Initially, the majority of interest from UCITS investors came for equity long/short and CTAs, which made sense given that these strategies can often fit within a UCITS wrapper, but as the market place has developed, investors are looking for diversification in their portfolios and therefore branching out to other strategies.
“That prompted more launches in global macro and credit for example, and more recently alternative risk premia. This was already an important space for our securities division and it has meant we can now offer many of these strategies in a regulated fund format.
“Not only can we launch funds with risk premia that is not managed (ie passive), we can also work with asset managers to provide combined solutions, where they selectively pick our risk premia products and manage them on an active basis.”
A good example of this is Aberdeen, who are managing a portfolio of risk factors in two versions (one enhanced) of their multi-strategy fund on the platform.
“This first managed risk premia product was added onto our platform in November 2016 and we are excited about the opportunities in this space,” explains Ben O’Bryan, Executive Director and Head of Fund Solutions, Goldman Sachs.
He notes that much of the demand for UCITS products has been driven by regulatory change. Certainly, with MiFID II coming into effect in January 2018, the bar has been raised for manufacturers and distributors of all financial products. Given that UCITS funds are well-established, highly regulated funds in their own right, O’Bryan sees them as becoming a more logical choice for many clients, moving forward.
The longest track on the platform dates back to December 2011 when the team onboarded Select Equity Long/Short UCITS, a US equity long/short fund which currently has USD120.7 million in AUM.
Some of the big European managers have become more adept at running their own stable of UCITS funds – both Marshall Wace and Winton Capital now offer a number of internally hosted UCITS to the market. However, for those managers outside of Europe without the infrastructure or expertise to operate in European regulated markets, they often need platform solutions as a way to tap into European investors.
Goldman Sachs provides a turnkey solution for managers. The platform works closely with investors to understand what they are looking for in terms of strategy type and calibre of manager.
“Everything we do is investor-driven. We are a solutions business. We don’t push out what we think is the best manager,” states Elliott.
O’Bryan also points out that having added managers from Asia and the US on to the platform, some have limited experience in setting up funds within the European regulatory framework and may not have European distribution scale. “We want managers to be able to focus on managing the investment strategy. All of the service providers are in place and the manager simply gets added to our existing infrastructure.”
This makes for quicker time to market and it takes away all the heavy lifting involved in the launch process.
One important consideration for managers is that they may end up with lots of smaller allocations in the UCITS fund compared to what they are used to in their offshore fund; certainly in the early stages of the fund, as it builds a track record.
As such, knowing that network of investors and having the resources to contact them is actually quite a heavy responsibility, “It’s not to be underestimated,” says Elliott.
O’Bryan concludes: “We have regional sales teams who are experts in each market. We provide them with the right information and analysis needed to facilitate the conversation between the manager and the investor.”
