OVER VIEW
SUBSTANCE OVER STYLE: MANCOS LOOK TO THE FUTURE BY KRISTINA WEST
T
he management company concept was first created to provide assurance of good governance and control with self-managed fund entities and vehicles. As funds proliferated and as the industry matured, the management company concept was born as an entity that would provide the necessary governance, oversight and services. Many firms took the decision at this time to create their own, internal management company; but since that time, the industry has seen greater development and detail of the rules, particularly with the focus on liquidity and sustainability, and expectations have grown, leading to the establishment of third-party ManCos servicing UCITS funds, AIFMs, or – more recently – both. INTERNAL OR EXTERNAL?
There are still compelling arguments for both
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inhouse and external ManCos, depending on the stage or situation of the firm; for example, those who want an EU European licence, whether for European distribution or individual account management, may wish to set up their own ManCo, while most of the top tier managers who required an EU contingency are now set up with their own regulated firms somewhere within the EU. However, for many, the costs of market entry are high, so firms need to consider how long they will be in the market, whether the costs are too prohibitive, and if the size of the investment is justified. Craig Blair, VP, General Manager, Board Member and Conducting Officer at Franklin Templeton, also flags risk appetite as an issue. “You have to have substance and specialisms in the domicile that the management companies are in.” The benefits of using a third-party
provider can include lower financial outlay for new market entrants, time to market, and going into a new area of investment where an experienced third-party provider knows the asset classes and can provide good governance. SUPER MANCOS
Key services offered by third-party providers revolve principally around the six key management functions required by legislation, either UCITS or AIFMD, with supervision of delegates, risk management oversight, and investor management oversight at their core. However, more recently, some third-party providers have begun to offer services in both UCITS and AIFMD funds. While the capital requirements, reporting and regulation structures may be different between the two, third-party ManCos have seen a gap in
MANAGEMENT COMPANIES IN FOCUS 2021 | OCTOBER
