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UMB Fund Services – Best Liquid Alternatives ‘40 Act’ Fund Administrator

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Much has changed in the ’40 Act space over the last five years or more. Far from being the preserve of traditional US mutual funds, as you move down the liquidity curve there are structuring opportunities for registered alternative products like closed-end interval funds, as well as multi-factor ETFs.

“Some managers want to offer highly liquid strategies – maybe long/short equity or market neutral strategies, unconstrained fixed income, managed futures strategies, etc – and we are seeing continued product development in that area. This fits nicely on our series trust platform for traditional ’40 act mutual funds,” explains Tony Fischer, President of UMB Fund Services. 

“As you move down the liquidity curve, fund managers can use our Registered Fund Solutions platform, which provides a complete solution for those wishing to establish an unlisted closed-end fund for more illiquid strategies. These products have all the same features and benefits of an alternative mutual fund, such as daily liquidity, but have a quarterly or less frequent redemption period. We’ve seen an uptick in these funds, also known as interval funds, in 2017.”

Given that these funds tend to operate in more illiquid areas of credit (high-yield bonds, distressed credit), as well as private equity and real estate, the net asset value (“NAV”) is based on price estimates. There is not a ready market to place these strategies into a traditional mutual fund; hence this is why interval funds are so useful. 

“We’ve been on a 10-year bull run here in the US and at some point that has to end. Registered alternative funds can be great strategies to buffer against downside market moves, to try to manage volatility and to take an un-correlated market position in the portfolio,” says Fischer. 

UMB Fund Services has seen some clients with prominent successes in the fixed income space, in particular, with a number of managers launching products with significant day one AUM. 

For the most part, established alternative managers are launching registered funds to go downstream to offer a slimmed down version of their offshore or other strategies to more high net worth and retail investors. 

Asked what managers need to look for before appointing the right ’40 Act fund administrator, he comments:

“We’ve been doing traditional ’40 Act work for mutual funds for more than 25 years. We’ve evolved with it, and developed extensive experience supporting these funds. I think what differentiates us is that we are very consultative. If a start-up manager – or indeed an established manager – wants to get into the registered alternative space, we spend a lot of time up-front educating them on what these structures look like. 

“Registered or unregistered, we focus on understanding our clients’ goals. Then, delivering the products and services that help them grow. Managers should look for an administrator that can provide more than just a core administration service; they should expect a high-touch partnership that delivers value throughout the relationship. 

“That added value might come in the form of asset raising support, customisation capabilities, or consultative conversations about a manager’s product mix. Look for an administrator with a reputation for client service and attention that is going to be a part of propelling your business forward. 

On winning this year’s award, Fischer remarks: “I want to thank our loyal clients who took the time to recognise our work in this category. Awards like these validate the extra effort our associates put toward delivering unparalleled client service every day. It is exciting when their efforts and dedication are acknowledged in the industry.” 

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