Why a Super ManCo is the Offensive Line Asset Managers need to reach the End Zone in new markets
20. December 2023
What challenges do North American asset managers face in growing AUM?
Asset managers around the world face a myriad of challenges when it comes to growth. Globally, market conditions have seen bond yields become increasingly attractive as compared to equities, resulting in significant fund outflows over the past years. For North American asset managers in particular, fundraising has become increasingly difficult due to intense competition in the local market.
North America is one of the largest and most competitive markets globally. In 2021, the North American asset management industry grew by USD 13 billion, reaching USD 167 billion in AUM. This increase, representing an annualized growth rate of 8 percent, was just over half the overall rate of the global industry’s asset growth, but it was almost double the industry’s rate of organic growth. Though promising for the industry at large, this growth means heightened competition for new entrants and highly skilled, established fund managers alike.
On top of the challenge of increased competition, ever-evolving regulatory and investor demands have recently required fund managers to intensify their focus on administrative and reporting functions and regulatory expertise.
What is the opportunity for international expansion?
As North American asset managers attempt to navigate a crowded home market and attract new investment, the value proposition of the European markets becomes increasingly clear. The lucrative European market is ripe for growth, due to fewer incumbents, as well as its growing internationalization and available capital.
Take for instance the German institutional market, which equates to nearly USD 3.7trillion. Institutional Investors in this market, and indeed Europe more broadly, are highly receptive to international fund managers with exceptional investment strategies and impressive performances.
What’s more, entering the right domicile in the European market such as Ireland or Luxembourg provides additional connectivity to global markets and further international reach. Structures such as UCITS have garnered almost universal appeal for their cross-border functionality. With the right fund structuring asset managers can tap into new investor pools globally, and effectively expand their businesses and grow their AUM.
Our team has supported clients to successfully develop such a strategy and build a global client base.
What are the challenges for North American Asset Managers to reach international expansion?
To successfully enter a new market, particularly the lucrative European market, managers face looming challenges on numerous fronts, including every increasing regulation and navigating the local distribution channels.
Combined, these threats can hinder any fund manager’s ability to successfully launch their strategy abroad. Asset managers must therefore decide whether to invest heavily in resources on the ground in the new regions in which they seek growth or collaborate with a local ManCo or fund distribution partner with presence and expertise in the market.
We often think about the roles that Super ManCos and asset managers play as being similar to the key areas of a well-run football team. Acting as an offensive line, a Super ManCo partner tackles the various challenges facing asset managers entering new markets.
The challenges faced head on by the ManCo include:
- Structuring: Fund structuring experts advise on the right vehicle for each manager’s needs and global ambitions, and project manage the establishment of the appropriate vehicle with enhanced speed to market.
- Regulatory: With domestic regulatory and legal expertise, a ManCo enables asset managers and their products to quickly adapt to an evolving regulatory landscape, such as the recently introduced Sustainable Finance Disclosure Regulation.
- Efficiency: ManCos create enhanced efficiency to clients of all categories. Simultaneously, they help reduce costs and increase operational efficiency by offering an existing infrastructure.
- Administrative: ManCos provide robust administrative and reporting capabilities, ensuring reporting transparency to all investor types including pension funds, corporations or foundations.
- Distribution: With a deep understanding of local institutional investors’ priorities, established networks to reach such investors, and an active sales force on the ground, ManCos with fund distribution capabilities open doors for fund managers to build their AUM.
Like the most successful modern Offensive Lines size, agility and experience are key components to look for in your ManCo partner.
If a Super ManCo partner can block these threats, what role do asset managers play in the strategy?
By entrusting some key business functions to an expert Offensive Line partner, asset managers are free to act as the Quarterback of their strategy. By choosing the right partner with sufficient size and scale to tackle threats, the asset manager is able to play this quarterback role with the necessary time and space to deliver on its strategy. With the primary hinderances to success anticipated and addressed by the Super ManCo, asset managers can turn their focus to the investment strategy and core expertise that sets them apart. Managers are empowered to run with their ideas, achieve exceptional performance, and reach the end zone in new markets, taking solace in the fact that threats are being neutralized by a skilled and sizeable supporting team.
For asset managers, the winning outcome of this team dynamic is international expansion and continued growth and evolution.
For more than half a century, Universal Investment has been Europe’s largest and most experienced Offensive Line, helping asset managers to strategically identify growth opportunities and guiding their successful entrance to new global markets.
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